Block Energy plc
Annual Report and Financial Statements
Year Ended 31st December 2022
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Contents
Company Information ........................................................................................................................................... 3
Strategic Report .................................................................................................................................................... 4
Strategy and Business Model ............................................................................................................................. 4
Chairman’s Statement ........................................................................................................................................ 7
Chief Executive Officer’s Statement ................................................................................................................... 9
Financial Review ............................................................................................................................................... 12
Principal Risks and Uncertainties ..................................................................................................................... 14
Statement of Corporate Responsibility ............................................................................................................. 19
Board of Directors ............................................................................................................................................. 22
Report of the Directors ....................................................................................................................................... 23
Governance Report ............................................................................................................................................. 26
Remuneration Report ......................................................................................................................................... 34
Independent Auditor’s Report To The Members Of Block Energy PLC .......................................................... 39
Financial Statements .......................................................................................................................................... 46
Consolidated Statement of Comprehensive Income for the Year Ended 31st December 2022 ......................... 46
Consolidated Statement of Financial Position as at 31st December 2022......................................................... 47
Consolidated Statement of Changes in Equity as at 31st December 2022........................................................ 48
Consolidated Statement of Cashflows for the Year Ended 31st December 2022 .............................................. 49
Notes Forming Part of the Consolidated Financial Statements......................................................................... 50
Parent Company Statement of Financial Position as at 31st December 2022 ................................................... 75
Parent Company Statement of Changes in Equity as at 31st December 2022 .................................................. 76
Parent Company Statement of Cashflows for the Year Ended 31st December 2022 ........................................ 77
Notes Forming Part of the Parent Company Financial Statements ................................................................... 78
2
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Company Information
Officers and Advisors
Directors
Paul Haywood
Philip Dimmock
Jeremy Asher
Chief Executive Officer
Independent Non-Executive Chairman
Independent Senior Non-Executive Director
UK Office
6th Floor, 60 Gracechurch Street
London
EC3V 0HR
UK company number: 05356303
www.blockenergy.co.uk
Company Secretary and Registered Office
Ben Harber
6th Floor, 60 Gracechurch Street
London
EC3V 0HR
Block Energy Plc is quoted on AIM (Symbol BLOE)
Advisors
Broker
Tennyson Securities
A trading name of Shard Capital Partners LLP
20 Fenchurch Street
London
EC3M 3BY
Nominated Advisor
Spark Advisory Partners Limited
5 St John’s Lane
London
EC1M 4BH
Statutory Auditor
PKF Littlejohn LLP
15 Westferry Circus
London
E14 4HD
3
Registrar
Share Registrars Limited
3 The Millennium Centre
Crosby Way
Farnham
Surrey
GU9 7XX
Bank
Barclays Bank PLC
1 Churchill Place
Canary Warf
London
E14 5HP
Public Relations
Celicourt Communications Limited
Orion House
5 Upper St Martin’s Lane
London
WC2H 9EA
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Strategic Report
Strategy and Business Model
Block Energy aims to build on its position as the leading independent oil and gas company in Georgia.
The Company plans to continue the development of its production assets and advance all activity
associated with appraising its high-impact gas resources and securing farm-out partners for the high
impact exploration projects across its portfolio.
The Company plans to scale up current production and reserves via efficient drilling programmes led
by a management team with deep experience in the Caucuses region and an operation team led by
local staff supported by the team in the UK.
The Company holds interests in six Production Sharing Contracts (“PSCs”) in Georgia, each at various
stages of the full E&P lifecycle. Opportunities across the portfolio encompass near-term production,
mid-term appraisal and longer-term exploration, and the Company defines these opportunities
concerning “Projects” as opposed to particular PSC licence areas.
The Company’s assets are presented in the following maps:
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Project I is focused on developing the Middle Eocene Reservoir of the West Rustavi/Krtsanisi field
contained within licence blocks XIB & XIF (wholly-held by the Company). The Company has undertaken
significant operational activity on the field since it acquired Block XIF in 2018 and Block XIB in 2020,
having undertaken a 3D seismic survey, drilled wells WR-16aZ, WR-38Z, WR-B01a and JKT-1Z
between 2018 – 2021. In 2022, the Company spudded the WR-B01Za well (a sidetrack of WR-B01a).
The Company has also constructed and operates a production facility at the West Rustavi/Krtsanisi
field.
In 2022, Block engaged independent reserves auditors, ERCE, to audit a development plan associated
with the first phase (of a total of 8) development of Project I. The ERCE report, published in July 2022,
assigns gross 3P reserves of 3.01 MMbbl and 2.14 BCF to a development area associated with a five
well programme. Wells JKT-1Z and WR-B01Za have since been drilled and are performing above
ERCEs base case production forecast. The Company’s short-term plan is to complete the initial
development of Project I by drilling three sidetracks/new wells and then to transition into developing the
broader Project I area, which contains 19.5 MMbbl gross 2C contingent resources based on the
Company’s internal estimates. A full field development plan for Project I has been concluded by the
Company’s subsurface and operational teams and, in due course, will be subjected to an audit by a
specialist firm. Project I is a robust, geoscience-led project that has benefited from back-to-back drilling
success and aims to continue delivering material short-term cashflows to the Company.
Project II is focused on the XIB licence, acquired from Schlumberger Production Management in 2020,
mainly on the Patardzeuli field but there is also potential in the Teleti, Samgori and Rustavi fields.
Patardzeuli produced at high rates (55,000 bopd) in the 1980s before production suddenly ceased. The
Company believes that substantial oil resources remain in the field and that a redevelopment
programme could deliver material results to the Company in terms of production and asset value. In
2022, work on Project II began with the deepening of the JSR-01 well. Internal contingent resource
estimates for Project II see a gross 2C contingent resource of 201 MMbbl in the Patardzeuli field and a
further 34 MMbbl within the Samgori field.
Project III is focused on the appraisal and monetisation of substantial gas resources at deeper intervals
in the Company’s XIB & XIF licences in the Lower Eocene, Upper Cretaceous and Palaeocene
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
reservoirs. Across the Company’s portfolio of XIB & XIF fields, over 14 wells have ether discovered or
produced commercial volumes of gas or otherwise indicated gas from these reservoirs. The target
reservoirs are often more than 1km thick and host a gas-bearing natural fracture system. The Company
has estimated over 1 TCF of 2C contingent resource with 860 BCF of gas resource in the West
Rustavi/Krtsanisi and Patardzueli/Samgori fields. The Company’s approach to Project III is to continue
geological, geophysical and reservoir engineering studies before advancing a phased appraisal
programme, initially comprising workovers and re-testing of wells that previously produced and
discovered gas. Project III is of strategic importance and value to Georgia, as the country imports c.
99% of its consumed gas and has recently sanctioned the South Dome underground gas storage
project, which is located in the heart of the XIB license and located adjacent to development areas
central to Project III plans.
Project IV is focused on exploration and commenced in 2022 with the farm-out of two portions of Block
XIB to Georgia Oil and Gas Limited (“GOGL”) in a transaction which saw GOGL fund the acquisition
and processing of 210 km of new 2D seismic data and the reprocessing of 1,000 km existing seismic
data within XIB. The new data supports overall estimates of 3.1 TCF gas and 1,400 MMbbl oil which, in
line with Block’s and GOGL’s farm out strategy for Project IV, has attracted regional NOCs and mid-
sized oil companies into the data room. This transaction was announced in 2022 and completed in Q1
2023.
The four Projects provide the Company with a robust and balanced platform for growth. Activities range
from low risk and low-cost development, focussed on generating rapid cash flow to de-risking high-
impact appraisal projects and undertaking a farm out strategy which will support strong shareholder
returns.
Block made good progress in executing its four Project strategy in the year ended 31 December 2022:
• Sold crude oil at higher prices as compared to last year (2022: $83.34/bbl, 2021 $60.65/bbl).
• Completed an independent Competent Person’s Report on Phase I of Project I, with ERCE
ascribing gross 3P reserves of 3.01 MMbbl and 2.14 BCF to a five-well programme.
• Spud the second Project I development well, WR-B01Za, which post-year end was put on
production above pre-drill estimates.
• Successfully deepened well JSR-01 on time and below budget.
• Signed binding documentation for a farm-out of part of XIB to GOGL, the transaction being
completed post-year end and is known as “Project IV”).
• Continued to build its management and technical teams in London and Georgia by
implementing training programmes and recruiting suitably qualified staff.
• Maintained a disciplined and focused approach to capital allocation by ensuring a technical,
commercial and economic review supports all capital investment decisions.
• Continued to improve its HSES processes and policies to ensure safe and sustainable
operations.
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Chairman’s Statement
Dear Shareholder,
The Company’s operations over the last year reflect the wider strategy to create a solid springboard
from which Block can deliver further growth by unlocking the potential of its significant asset base in
Georgia while mitigating, through diversification, risks to shareholders and lenders, including those
related to operations, revenue and cashflows.
Block’s portfolio of assets offers material potential to deliver on this strategy, with opportunities to
increase production and revenue in the near and medium term and in the longer term through Company
making opportunities in substantial deep gas resources.
Along this journey, there will inevitably be operations that deliver better results and returns than others.
While this is a general feature of oil & gas, it is particularly true for our business in Georgia, which is
weighted towards production rather than exploration due to the complexity of the reservoirs when
compared to many other regions of the world.
The best way to regard Block, therefore, is to consider the totality of the opportunities in the planned
portfolio of wells rather than on a well-by-well basis. The best way to unlock the value is through multi-
well operations.
Reflecting that approach in 2022, the Company introduced its four-project strategy, initially focusing on
developing production, revenues and cashflow from Projects I & II. The results from Projects I and II to
date have been very encouraging, including the completion of two successful Project I wells, one during
the year and one in 2023, and of a successful Project II well, which proved the concept of unswept oil
in the Patardzeuli Field.
The success of these wells was based on the culmination of the knowledge gained from previous wells,
which have all added to the Company’s understanding of the sub-surface and its ability to build a model
that informs and supports future drilling. I am, therefore now confident that our geoscientists can use
3D seismic attribute analysis to accurately locate the natural fractures that give high levels of
productivity and that our operational staff can drill horizontal sidetracks through pressure-depleted,
faulted reservoirs with cost-effective efficiency.
The three successful wells are delivering a material increase in production rate, which, along with higher
crude oil and gas pricing and the benefit of a successful workover campaign in the first half of the year,
has already contributed to a stronger financial performance. During 2022, the Company saw the loss
on the year reduce materially from $4,581k in 2021 to $1,160k. This year-on-year performance
improvement is continuing into 2023, and I am confident that this year will see a profit for the first time.
All of this is only possible with a rigorous approach to managing and mitigating the inevitable day-to-
day risks facing the business, including those of costs and financing, safety and the wider business
environment, among others.
Cost management is part of the Company’s culture and has been effectively delivered through improved
efficiencies, aggressive supplier contracting, careful and considered investment planning and by
employing innovative solutions to unforeseen problems, a good example of which being the use of
internal resources, to undertake very low-cost remedial operations on well WR-B01Za, resulting in the
Company’s most successful producing well.
Effective management of the cost base not only improves the returns from successful wells but also
minimises the costs of those wells that could be more successful. During 2022, the keen focus on cost
management was reflected in overall costs remaining relatively flat and G&A costs decreasing
substantially.
Of utmost importance to the Board is the safety of our people and our contractors, the protection of the
environment and the wellbeing of nearby communities. The review of HSES management performance
is always the first agenda point at Board meetings. It is of paramount importance that our people work
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
in a safe environment, and it is also vital to the efficient operations of the business. By taking the
wellbeing of our people and local communities seriously, along with the protection of the environment,
we are best placed to be able to attract and retain the best people and suppliers, and we limit the chance
of our operations being delayed or postponed, due to injury or the influence of third parties.
The Company cannot influence a number of external factors, such as global crude oil prices. During
2022, Block Energy enjoyed relatively high crude oil prices, but markets are volatile, and accordingly,
the Company puts in place measures to mitigate this exposure.
The Company was otherwise able to operate during 2022 unfettered by external influences. With the
pandemic having receded, Block was no longer subject to the restrictions imposed by it, and while the
war in Ukraine has caused terrible anxiety and harm for many, it has not impacted the Company’s
operations.
Key to ensuring effective management of the business in the interest of all stakeholders is governance.
Block has always kept a keen focus on this, as reflected in the structure and experience of the Board,
along with the regularity and structure in which Board meetings take place.
Alongside meeting of the whole board, Block has a rigorous system of sub-committees covering key
areas of the business, from finance and nominations to ESG. These committees meet regularly and
report to meetings of the whole Board.
The balance of the Board was maintained despite changes that occurred, including Ken Seymour
moving from a non-executive to an executive management position and William McAvock resigning as
CFO and leaving the Board.
While 2022 was not without its challenges, the Company and team can be proud of what has been
delivered. With three successful wells, all adding materially to production, the return on investment that
has been achieved is significant.
Furthermore, as the enhanced levels of production continue to feed into a stronger cash position, the
Company will be increasingly well placed to execute its multi-well strategy across its four projects and
deliver additional value at reduced risk without the need to dilute shareholders.
I would therefore like to take the opportunity to thank our team of 120 people in Georgia and six in
London for the consistent dedication and commitment they show the Company. That of the operational
and geoscience teams is obvious from the increasing production rate. But they are kept safe and the
environment protected by our ever vigilant HSES team. Our commercial team negotiates effective
contracts with suppliers, sells the produced oil and gas into limited local markets, procures the
necessary permits and ensures that our neighbours in the local communities are kept undisturbed by
our operations. Last but not least, our dedicated accountants maintain the accurate records you see in
this Annual Report.
We are also very grateful for the support and encouragement from all within the Georgian state agencies
with whom we interact.
Our Company now has a stronger platform on which to realise its potential. On behalf of the Board, I
would like to thank you all for your support. We look forward to engaging with you with further updates
as the rest of the year unfolds.
Philip Dimmock
Non- Executive Chairman
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Chief Executive Officer’s Statement
Dear Shareholder,
Since announcing the Company’s three project strategy approximately 12 months ago, marking the
start of concurrent development and appraisal activity, Block has made material progress. This has
included the safe and successful delivery of multiple wells, increased production, material revenue
growth, a successful farm out, and fulfilling the XIF licence minimum work programme (“MWP”)
commitments.
The achievements would not have been possible without the continued hard work, dedication, and
experience of the Company’s team. Since 2020 they have successfully navigated macro and micro
headwinds associated with a global pandemic, a commodity price collapse, war, and significant cost
inflation, all while delivering on our operational and strategic plans.
Health, Safety and Environment
The safety of the Company’s operations and team is of the highest importance and central to delivering
the Company’s transformative growth strategy. Block continues to focus on enhancing the effectiveness
of its safety measures, process and procedures whilst supporting personal development and rigorously
building and incentivising a culture of care for others.
The strength of our systems and procedures in place is reflected in the Company’s HSES record, with
one minor lost time incident reported across the 382,542 operational man-hours worked in 2022.
We continued to build on our commitment to the environment and local communities and established a
board-level ESG committee. In line with our commitment to the environment, the Company monitors its
emissions to minimise its CO2 footprint, including targeting zero-flaring of gas from operations. During
the year, total reported emissions were 618.42 tCO2 from operations, mainly a result of the need to flare
283,802mᶟ of gas due to unplanned shutdowns.
Operations
The Company delivered on its operational plans for 2022, which included increasing near-term
production and cashflows from Project I, proving the concept of un-swept oil in the Patardzueli field
under Project II and advancing the Project III high-impact 1 TCF contingent gas resource opportunity.
Additionally, Block secured a farm-out of non-core areas within XIB, establishing Project IV and
providing the Company with direct exposure to high-impact exploration.
Project I
Early in the year, the Company announced the safe and successful execution of well JKT-01Z, which
achieved a stable production rate of 310boepd, in line with our guidance to the Market, significantly
boosting the Company’s total production at that time.
JKT-01Z is performing in line with the 3P (or high) case, as presented in the Project I Competent
Person’s Report (“CPR”), announced in August, which attributed gross 3P field reserves of 3.01 MMbbls
and a 3P NPV of $57m.
That CPR focused on part of the West Rustavi and Krtsanisi oil fields only, auditing internal plans for
the phase one, five-well development programme. The Company’s Contingent resource report ascribed
2C of 19.5 MMbbl to the entire West Rustavi / Krtsanisi Middle Eocene reservoir, providing plenty of
scope for significant reserve upgrades in the future, on further drilling success.
The planning and construction of facilities for WR-B01Za, the next well in the five-well programme, was
completed later in the year, enabling the rapid monetisation of production from future wells. Post-year-
end, well WR-B01Za was successfully drilled, completed and tested at 269bopd. Since being tied into
the production facilities and handed over to the production team, the well continues to perform, providing
another material boost to total production.
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Recent drilling success has significantly increased our confidence in Project I. We plan to drill three
further wells (as defined in the CPR), and will prioritise this work programme moving forward. In parallel,
the team is working on a full field development plan consisting of five additional back-to-back drilling
phases.
Project II
In September, the Company commenced Project II with the drilling of well JSR-01 and successfully
proved the concept of un-swept oil within the Patardzeuli oil field, Georgia’s most prolific field. Well,
JSR-01 was safely drilled to the base of the 600m thick middle Eocene located at a depth of
approximately 2,800 metres, on plan and below budget. JSR-01 was brought into production at a rate
of 45boepd, proving recovery of commercial volumes of oil and supporting plans to appraise additional
targets.
Following these results, the drilling team upgraded the Company’s service rig to enable it to be better
utilised across a multi-well drilling programme, where four candidates have been risked, ranked, and
prioritised. Following this initiative, Project II can advance in parallel to planned drilling under Project I.
Project III
Project III exposes the Company to a large undeveloped gas resource within the Lower Eocene,
Palaeocene and Upper Cretaceous reservoirs of licence blocks XIB and XIF. Work throughout the period
has focused on internal resource auditing, producing a conceptual development plan, negotiating long-
term gas sales agreements with the state of Georgia and scoping out facility requirements to handle a
plateau phase one production rate of approximately 30 mmcf/d rising to 60 mmcf/d within 18 – 24
months.
The appraisal and development plan will kick off with the side track of the PatE1 well. This well is in
close proximity (c. 8km) to the state-owned Samgori South Dome Underground Gas Storage Project
(SSDUGS). The $290m Government-backed project is designed to store approximately 300 million
cubic metres of gas, equivalent to roughly 15% of Georgia’s annual consumption. To date, the State
has assigned €150m to the SSDUGS. Success at Project III will see Block deliver gas volumes to
SSDUGS, the growing domestic gas market and/or export to Europe via the southern caucuses
pipeline.
Production
Production for the year was relatively stable, reflecting the success of well JKT-01Z and the extensive
23-well workover programme in the first half of 2022, offset by natural decline. This resulted in average
production during the year of over 450 boepd, representing a 5 % increase over the prior year (2021:
427boepd).
Post-year end, the Company sees record production levels of over 620 boepd in April 2023, reflecting
the added benefit of production from well WR-B01Za, alongside stable and strong levels of production
from well JKT-01Z and rapid and efficient routine maintenance across other mature wells.
Corporate
As a result of the successful development of the XIF license, which included geological studies, a 3D
seismic campaign and the drilling of multiple wells, Georgia’s State Agency of Oil and Gas, confirmed
that all requirements under the XIF minimum work programme had been fulfilled. Integrity over the XIF
license is therefore secured until 2043.
The Company also completed the successful farm-out of 50% of the non-core areas of licence XIB, to
Georgia Oil & Gas Limited (“GOGL”), for a work programme valued at c.$3m, which significantly
advances the exploration potential of non-core areas within the licence at no cost to Block. This provides
the Company with direct exposure to 3.1 TCF gas and 1,400 MMbbl oil unrisked prospective resources
within GOGL’s portfolio, of which, the state of Georgia is a 22% partner via a cash investment into the
project.
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Under the farm-out terms, the work programme committed by GOGL consists of $2.5m of 2D seismic
acquisition and $0.5m of seismic reprocessing. The farm-out has no impact on the Company’s current
operator status, existing production and/or development plans associated with Projects I, II or III.
Financials
Total Group revenue from the sale of oil & gas during 2022 was $8.26m, representing a 35% increase
over the prior year. Revenue was predominantly from oil sales, which increased to c $7.5m during the
year, with the remaining $0.77m from the sale of gas.
The year’s revenue increase, combined with relatively flat operating costs, including a decrease in G&A,
resulted in a significant decrease in the operating loss for the year to $1.8m (2021: $4.7m).
Post reporting period, the Company secured additional funding through a senior secured loan facility of
$2.0m, with various shareholders and members of Block’s management team. The facility is in place to
accelerate Project I and III plans, and $1.06m has been drawn down.
Looking forward
As revenue grows, so can the Company. This is why we remain focussed on accelerating the Project I
development programme alongside Projects II, III and IV. Success will create significant shareholder
value and cash flow and provide the Georgian Government and society with greater energy security.
Our plan is clear, the strategy is working, and the team is highly motivated to execute operationally and
strategically. As we enter our next drilling phase, the Company has never been in a more exciting
position.
I want to thank our shareholders for their continued support throughout a challenging yet highly exciting
year and finish by thanking the entire team at Block Energy for their continued drive and passion towards
delivering the plan and growing our business.
Paul Haywood
Chief Executive Officer
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Financial Review
Balance Sheet
On 30th November 2022, the Company announced that the outstanding Consideration due to
Schlumberger Production Management (“SLB”); (the seller of XIB) had not been taken up and that the
108,000,000 nil-cost options issued to SLB were to be cancelled. This decision has significantly
improved the Company’s accumulated deficit, reducing the deficit to $16,349,000 (2021: $21,548,000).
The Group’s assets have remained stable, with non-current assets at $24,815,000 (2021: $24,345,000).
At the end of the year, the Group’s cash balance was $450,000 (2021: $1,244,000).
Income Statement
The Group’s revenue from oil and gas sales increased to $8,262,000 (2021: $6,114,000) and other
income included $281,000 from an insurance claim. The current year revenue from sales of crude oil of
$7,492,000 (2021: $5,519,000) comprised the sale of 89,900 barrels (2021: 86,700 barrels), which
equated to an average revenue of $83.34 (2021: $60.65) per barrel.
During the year, the Group produced 120,359 barrels of crude oil (2021: 108,000 barrels), with the
increase in production primarily due to the JKT-01 well, which was brought online in January 2022. Gas
production stood at 267 mmcf (2021: 288 mmcf). This gross production includes the State of Georgia’s
share of production before cost recovery and profit sharing.
In addition, the Group had over 9,000 barrels of crude oil inventory as of 31st December 2022 (31st
December 2021: 20,000 barrels). Following the year end, during Q1 of 2023, the Group sold 13,300
barrels for net revenue of $999,000 and additionally successfully tested WR-B01Za, the second of the
Project I development wells, which established stable production above pre-drill estimates.
In the year, the Group sold gas to the value of $770,000 (2021: $596,000).
The total loss for the year was $1,160,000 (2021: $4,581,000), representing a significant improvement
on last year’s results.
Liquidity, Counterparty Risk and Going Concern
The Group monitors its cash position, cash forecasts and liquidity regularly and has a conservative
approach to cash management, with surplus cash held on term deposits with major financial institutions.
The directors have prepared cash flow forecasts for 24 months from the date of signing these financial
statements. The Group’s forecasts are reviewed regularly to assess whether actions to curtail
expenditure or cut costs are required.
The Group’s operations presently generate sufficient revenues to cover operating costs and capital
expenditures, supporting the continued preparation of the Group’s accounts on a going concern basis.
rates
from existing wells and
The directors are conscious that oil prices have been volatile during the past few years and could rise
further but could also fall back in the year ahead and that future production levels depend on both
depletion
future drilling. As part of
their going concern assessment, the directors have examined multiple scenarios in which oil prices
and/or future production levels fall substantially and have concluded that it remains possible that future
revenues in at least some scenarios might not cover all operating costs and planned capital
expenditures, creating a material uncertainty that may cast doubt over the Group’s ability to continue
as a going concern. Whilst acknowledging this material uncertainty, the directors remain confident of
making cost savings if required; therefore, they consider it appropriate to prepare the financial
statements on a going concern basis. The financial statements do not include the adjustments that
would result if the Group were unable to continue as a going concern.
the success of
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Results and Dividends
The results for the year and the financial position of the Group are shown in the following financial
statements:
- The Group has incurred a pre-tax loss of $1,608,000 (2021: loss of $4,783,000).
- The Group has net assets of $27,200,000 (2021: $27,065,000).
- The Directors do not recommend the payment of a dividend (2021: $nil).
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Principal Risks and Uncertainties
There are general risks associated with the oil and gas extraction industry and those specific to Block
Energy. The Board, through the Audit and Risk Committee, regularly reviews the risks to which the
Company is exposed and endeavours to mitigate these risks as far as it can. Given the current size and
simplicity of the business, the Board considers that there is no immediate necessity to establish an
independent audit function.
The following summary outlines the principal risks and uncertainties facing the Company at its present
stage of development:
Description
Impact
Mitigation
Regional tensions could have an
adverse effect on
local
the
economy and our business.
Strategic Risk
Georgia shares borders with Russia,
Azerbaijan, Armenia and Turkey and
could be adversely affected by
political unrest either internally or in
surrounding countries. Georgia has
had ongoing territorial disputes with
Russia since Georgian independence
in 1991. These disputes have led to
sporadic violence and any escalation
of such issues could impact the Group
operationally, logistically or financially.
Risks associated with inorganic
growth (such as overpaying or
conducting
due
diligence).
insufficient
Any acquisition of new oil, gas or
energy assets might negatively affect
the Group’s cash flows, operating
results or financial condition.
Oil and gas prices may decrease
significantly.
Financial Risk
Significant decreases in oil or gas
prices over a sustained period would
negatively affect the Group’s cash
flows, operating results and financial
performance.
exchange
Currency
rate
fluctuations may negatively affect
the Company.
revenues and
The Group’s consolidated financial
statements are presented in United
States Dollars. The major portion of
both
costs are
denominated in United States Dollars
also. However, part of its revenues
are expressed and certain costs are
incurred in British Pounds Sterling,
Georgian Lari and other currencies.
in exchange rates may
Changes
14
The Board monitors all political
developments on an ongoing basis and
from senior
receives regular reports
management
the
political and security situation. This
ensures that swift action can be taken if
required.
in Georgia around
The Group has the skills and expertise to
manage acquisitions and retains both in-
house and external expertise for due
diligence and asset evaluation. All
potential acquisitions are reviewed from
technical, commercial,
a strategic,
operational, HSES
financial
perspective.
and
Capital commitments and operating
costs are routinely reviewed by the Board
and planned spending is examined in the
context of prevailing oil and gas prices.
Regular detailed cashflow forecasts are
reviewed and discussed and sensitivities
relating to oil and gas prices are carefully
considered. In the event that oil and gas
prices decreased significantly, the Board
would review company-wide costs and
development programmes and react
appropriately.
The Company seeks to minimise its
exposure to exchange rate fluctuations
by primarily contracting in United States
Dollars where possible. Where this is not
possible, the Company reviews risks
associated with foreign exchange and
assesses hedge products from a cost/risk
perspective.
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Capital investment cost.
impact the Group’s cost base and
financial reporting.
Higher costs than anticipated might
the Group’s
negatively
results or
cashflows, operating
financial condition.
affect
reviews
regularly
The Company
its
planned capital investment programme
and seeks to optimise cost. Proposed
plans are scrutinised by management
and robust procurement and tendering
strategies are in place to ensure that
costs are within forecasts. Regular cost
reviews occur and cost performance is
tracked during operations. Over
its
history, the Company has a good record
of delivering wells and projects to budget.
Capital investment programmes
may require third-party finance.
gas
Over-reliance
purchaser and few oil purchasers.
one
on
Poor production performance.
The Company’s development strategy
will require significant capital to fully
exploit its potential. The Company will
need to generate free cash from its
operations and may require third-
party finance (either debt or equity,
with associated capital cost) to be
able to fund these costs, depending
upon the spending profile of the
development programmes, the oil and
gas production
the
prevailing oil and gas price.
rates and
The ability of Block Energy to arrange
financing in the future will depend in
part upon the prevailing capital market
risk
perceived
the
conditions,
and
associated with Georgia,
business
the
of
performance
Company. Fluctuations in oil and gas
prices may affect lending policies for
potential future lenders. This in turn
could limit growth prospects in the
short-term or may even require Block
to divert existing cash
Energy
balances or cash flows from other
intended purposes
(e.g. capital
expenditure).
An inability to sell oil or gas would
the Company’s
negatively affect
cashflows, operating
results or
financial condition.
The Board is proactive in identifying
possible business risks and
funding
shortfalls. A fund warning structure is in
place, which is activated when funding
levels reach certain low cash resource
parameters and capital spending
is
judged on a case-by-case basis. This will
ensures that the Company’s planned
development
are
affordable.
programmes
regular
The Company maintains
reporting structures, so that all issues are
quickly identified by the Board, be it
operational or financial in nature.
The Company maintains frequent contact
and dialogue with
institutional and
industrial providers of debt, equity and
offtake finance.
The Company also plans to mitigate the
risk associated with Project IV, deep gas
exploration and appraisal, by farming out
a portion of its interests in return for a
contribution to the capital costs.
The Company maintains regular dialogue
with local and regional oil and gas buyers
and seeks to ensure that commercial
relationships with existing purchasers are
strong.
The Company’s sales contracts are
linked to international benchmark prices.
Operational Risk
Less cash flow than expected from
operations might negatively affect the
operating
cashflows,
Company’s
results, investment plans or financial
condition.
The Company maintains a prudent
approach to production forecasting and
adopts generally lower than expected
production
forecasts in budgets and
cashflow forecasts.
15
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Permits, licences and leases.
The Company’s operations and
development plans require permits,
licences and leases from various
local governmental
national and
authorities in Georgia. The Company
to obtain all
may not be able
necessary permits,
licences and
leases that are required to carry out its
development
exploration
and
programmes in a timely manner. In
such
the Company’s
development projects may take longer
cashflows,
than
financial
operating
results
performance may
affected
negatively.
and
be
planned
events,
and
If the Company’s existing permits,
licences and
to be
terminated or withdrawn, such an
event could have an adverse effect on
the Company’s operations.
leases were
The proposed development plans
are subject to operational risks.
Drilling and workover campaigns
performed by the Company involve
potentially complex and difficult
technical operations in which there
are inherent risks. Such risks include
mechanical
failure, human error,
errors in operational planning and the
encountering of unforeseen difficulties
during operations.
The Company operates multiple assets
with varying risk, capital and production
profiles which enables it to spread the
risk of production performance across its
various licences.
The Company is strongly committed to
compliance with all aspects of Georgian
legislation and the PSCs. The Company
specifically qualified and
employs
experienced individuals in Georgia who
are familiar with the PSCs and national
and
legislation and who have
experience of obtaining operating
permits.
local
for
that
local support
representatives
The PSCs contain provisions obliging the
government of Georgia to co-operate
fully with the Company in obtaining all of
the necessary consents and permits. The
Company additionally engages with local
stakeholders and
to
the
ensure
Company’s operations is present. The
Company also has
fiscal and
operating performance under the PSCs
independent
audited annually by an
auditor, currently PwC, and ensures that
plans, permit requirements and other
relevant information are communicated
to the government’s representative under
(Georgian Oil and Gas
the PSC’s
Corporation) at quarterly coordination
committee meetings.
its
Heavy industrial activities are associated
with risks that cannot be eliminated. The
Company seeks to mitigate them by
ensuring it has robust HSES policies, an
HSES department, a rigorous focus on
HSES from the Board downwards as well
as employing experienced professionals
to plan and execute operations.
Additionally, the Company employs a full-
time subsurface team and has access to
industry-leading structure and reservoir
evaluation software.
The Company has drilled and worked
over 116 wells since it commenced
operations in Georgia and has developed
a strong understanding of the human,
mechanical, operational and subsurface
risks associated with such operations.
HSES Risks
Accidents and risks associated
with operations (e.g. blowout, fire,
injury).
Serious accidents can result in a shut-
down of operations, injury or loss of
life, damage to equipment or property,
The Company has robust HSES policies
and has an emergency response plan
which is reviewed by the operations
department and the Board regularly. The
16
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
damage to the environment and a loss
of credibility and/or licence.
and
Board is heavily invested in HSES policy,
procedure
has
established an HSE Board committee to
review
the Company’s performance,
plans and responses to incidents.
culture
and
The Company employs a full-time HSES
department and regularly trains staff in
HSES management. Daily worksite
safety meetings, an observation card
system and an HSES reporting function
strengthen
the Company’s HSES
performance. PPE is provided to all field
working staff. The Company provides on-
facilities during drilling
site medical
operations
inspects
equipment
for signs of damage or
potential failure and tests equipment prior
to use. HSES reviews are undertaken
prior to any operation.
routinely
and
Environmental
caused by oil and water spills.
contamination
Serious environmental contamination
can lead to a shut-down of operations
and a loss of credibility and/or licence.
The Company continues to repair and
upgrade its wells and production facilities
to reduce the risk of spills and equipment
failure.
In 2022, a Board level ESG committee
the
was established
Company’s
to
environmental
practice was
enhanced.
to ensure
commitment
best
that
Non-compliance with
regulations.
laws or
The Company may incur penalties,
fines or loss of reputation.
Legal and Compliance Risks
The Company undertakes training for
field-based staff to improve operating
procedures and reduce the risks of
environmental contamination from the
Company’s operations.
The Company has a strong compliance
framework and employs experienced
directors, staff and advisors. The
Company has
robust policies and
procedures and ensures that it complies
with all laws or regulations to which it is
subject to.
Fraud, bribery or corruption.
The Company may suffer financial
loss, incur penalties or fines or a loss
of reputation.
The Company has a strong fraud, bribery
and corruption framework and accords
the highest standards
to corporate
governance matters.
The Company employs suitably qualified
directors and staff with knowledge of
compliance and best-practice financial
and operational methods. An annual
certification scheme
the
Company’s Legal Counsel covering all
staff
just management) and
management staff and other key staff
run by
(not
is
17
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
in contracts
members have clauses
disallowing bonuses in the event of
companywide maleficence. The Board is
attuned to these risks and standing board
agenda items cover them. Finally, the
Company employs an independent third-
party auditor to audit the Company’s
financial statements and governance
methods and additionally employs a
third-party independent auditor to audit
costs and revenues under the PSCs.
regular
The Company maintains
communication and dialogue with the
State, the State Agency of Oil and Gas
and GOGC
the Company’s
through
directors and senior management.
The Company attends a quarterly
coordination committee meeting with
GOGC (as specified by the PSCs) in
discusses
which
production performance, development
plans and financial results and agrees
outline budgets and performance against
such budgets.
Company
the
In addition, the Company also has its
fiscal and operating performance under
the PSCs audited annually by an
independent auditor, currently PwC.
The Executive Directors have notice
periods of no less than three months to
to hand over
ensure sufficient
the event of a
responsibilities
departure.
time
in
The Remuneration Committee regularly
and
evaluates
incentivisation schemes to ensure that
the Company’s package is competitive.
compensation
Dependence on key relationships
including the State of Georgia and
Georgian Oil and Gas Corporation
(“GOGC”).
Dependence on key executives
and personnel, employee retention
and recruitment.
Organisational Risks
The success of the Company and the
effective operation of the Company’s
interests in Georgia is dependent in
part on good relationships and co-
operation with key governmental
parties,
national
the authorised
government and
representative of
the government
under the PSCs, GOGC.
including
the
The State is a counterparty to the
Company’s PSC. Accordingly, if the
State, its Agency (State Agency of Oil
and Gas) and/or GOGC cannot
cooperate with each other or the
Company, it could harm the business,
operations and prospects of
the
Company.
the expertise of
The Company has a comparatively
small number of key staff and
management personnel. The future
success of the Company depends
partially on
the
Directors and senior management.
The loss of key personnel and the
recruit additional key
inability
personnel could have a negative
future
effect on
business and
In
addition, the loss of the services of the
Executive Directors or other key
employees
the
Company’s business.
the Company’s
trading
damage
results.
could
to
18
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Statement of Corporate Responsibility
Block Energy plc has a practical and open approach to its Corporate Responsibility. Our Corporate
Responsibility programme is focused on doing the right thing, managing risk and investing sustainably
in the community in which we operate.
Impact of Culture on Decision Making
Our investment decisions carefully consider environmental and social impacts and how such effects are
best managed for all stakeholders. Our operations should not compromise the well-being of current or
future generations. This responsible behaviour is a crucial element for our long-term business success.
For Block Energy this means:
• Acting with respect for people, communities and the environment;
• Acting honestly and openly with all stakeholders, fully respecting the rule of law and human
rights;
• Contributing to the economic and cultural development goals of Georgia;
and
•
Corporate Responsibility
Integrating
planning, implementation and management systems;
sustainability
into
our
strategy,
• Providing transparent public reporting on our management systems and performance.
The Company has prepared several detailed Environmental Impact Statements (“EIS”) to cover its
operations. These have been submitted to and discussed with the Georgian authorities.
Health, Safety, Environmental and Social Performance
The Company strives for continuous improvement, and Block Energy is committed to maintaining high
standards of health, safety, environmental and social performance (“HSES”) across all its oil and gas
operations. To achieve this, as an integral part of our business, we:
•
Identify, assess and manage HSES risks to people, the environment and assets in order to
avoid adverse direct or indirect effects from our operations.
• Ensure that our operations comply, at a minimum, with applicable health, safety, environmental
and social laws and regulations, as well as the best practicable industry standards.
• Maintain high ethical standards in carrying out our business activities.
• Provide the necessary leadership, training and resources to enable effective HSES
management throughout our organisation.
• Strive to prevent and minimise the impact of our operations on the environment.
• Ensure continuous improvement of HSES performance by setting objectives and targets and
apply focused auditing, reviews and external benchmarking.
• We select competent staff, contractors and suppliers to manage and support the business.
• Ensure that the highest priority is placed on emergency preparedness and contingency
planning and that any plans are tested regularly to ensure that any incidents are responded to
promptly and effectively.
• Foster a culture where accidents, incidents and near misses are reported and investigated and
lessons learned are shared.
• Consult with and respond to our stakeholder's concerns on our health, safety environmental
and social performance.
• Ensure that HSES policy is communicated to all staff and contractors and displayed in all Block
Energy premises and operational sites and made publicly available.
• Empower the Company’s directors, employees and contractors to take responsibility for
maintaining high HSES standards.
19
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Section 172 (1) Statement and Stakeholder Engagement
The Directors believe they have acted in the way most likely to promote the success of the Company
for the benefit of its members as a whole, as required by s172 of the Companies Act 2006.
We understand that our long-term success depends on our relationships with our stakeholders. We
strive to provide our stakeholders timely and practical information, responses and support. The following
table summarises how we identify and seek to meet their needs, interests and expectations.
Stakeholder
Employees. Our
capacity to design and
execute our strategy
depends on the health,
development and
retention of our
dedicated and skilled
staff.
Reason For Engagement
Transparent and regular
communications with our staff is
essential for ensuring an
understanding of commitment to
the Company’s objectives.
As an oil and gas exploration
and production company we
have particular health, safety,
environmental and social
obligations (see “Communities
and Environment” below).
Shareholders. We
provide transparent,
accessible, regular and
balanced information
to our shareholders
and investors to
ensure support and
confidence.
Understanding the perspectives
of our shareholders and their
sentiment regarding the
business, its prospects and the
performance of management as
well as meeting regulatory
requirements.
Industry Bodies,
Local and National
Governments. Our
operations and
business practices
must meet certain legal
and regulatory
requirements.
We work hard to meet our
regulatory obligations to retain
our good standing with
regulators, the Georgian
government and the wider oil
and gas sector. Our relationship
with the local and national
government is a key to our
success and has taken a long
time to develop.
Communities and
Environment. Our
operations are
embedded in a
complex local
economic and
environmental
ecosystem.
We understand that our
operations can have negative
effects on the local economy or
environment if not properly
managed and if risks are not
properly mitigated. We place the
highest focus on ensuring that
our operations are conducted in
a safe, responsible manner and
that we make a positive
contribution to local
communities.
How We Engage
Management in London and Georgia have daily team
meetings. The wider international team has a weekly
meeting. The Executive Director and senior
management make regular trips to Georgia to work
with our staff onsite. The management team have
regular one-on-ones with every staff member and
transparent performance targets are mutually agreed.
We also undertake training and development sessions
(particularly around HSES, compliance and event
prevention) and ensure that our staff are properly
motivated and included within the Company’s aims
and objectives.
We publish announcements on the London Stock
Exchange’s website and our website and across our
online channels.
Interviews with our directors and senior management
are published as videos or podcasts and accessible to
a large audience. We operate an investor mailing list
subscription service. We issue regular updates to our
corporate presentation. We attend investor relation
events and meet with industry analysts. We publish
our annual and interim accounts and are physically
available for any shareholder at the AGM. We hold
one-to-one sessions with our largest shareholders.
We adhere to Georgian state regulations and since
inception, have maintained good standing on all
interests associated with its working interest in all
Production Sharing Contracts. We commit to fulfilling
our AIM obligations. We engage an independent
auditor to perform an audit of the Company’s
processes and financial risks. We engage an
independent auditor in Georgia to ensure our local
financial reporting meets local standards and
regulations. We have developed comprehensive
Market Abuse Regulations (MAR) and anti-bribery
policies. We take legal compliance extremely
seriously.
We have written HSES policies and ensure that all
staff and contractors adhere to such policies. HSES
performance is embedded into the director’s and
senior management’s performance targets. We have a
strong focus on HSES and ensure that it is embedded
in to all of our operational and management processes
and receive daily reports on HSES compliance. We
investigate all HSES policy breaches and work to
remedy them.
We maintain two board-level committees, the HSE
Committee and the ESG Committee which are tasked
with further developing our policies, compliance and
performance. We monitor and report emissions and
environmental performance. We work with National
and Local government to support the communities in
the areas where we operate and invest in local
community programmes. We provide employment and
20
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Suppliers. We engage
contractors and
purchase from a wide
range of suppliers,
around the globe.
We recognise that our suppliers
and contractors are essential to
our operational and financial
success and understand that
third parties working on our
operations can impact our HSES
policies.
personal development opportunities for all employees,
whilst further extending this support, into the local
communities in which we operate. We also maintain a
website for our operating company, Block Operating
Company, in the Georgian language to ensure local
communities and more broadly, people of Georgia, can
remain informed on our Company’s activity.
We integrate our MAR, anti-bribery and HSES policies
into all agreements with contractors. Where
contractors are working in our operations we ensure
that HSES briefings and training are undertaken.
We have robust financial processes for settling our
invoices with our contractors and service providers
and take care to ensure we source products and
services from ethical suppliers. Where possible and
commercially competitive, we try to ensure goods are
sourced locally, so to support local businesses.
The Board is responsible for establishing and communicating policies and procedures for risk
management and internal controls. We recognise that risk management is an essential business
practice, and we work to balance risk, return, threat and opportunity. We maintain a detailed risk register
which is routinely reviewed by the Audit and Risk Committee and the Board.
Climate Change
For our sector, stakeholders and investors have a keen interest in climate change, and we can assure
them that Block is wholly committed to good environmental stewardship. We have a robust approach
to corporate responsibility and sustainability issues, underpinned by our commitment to high standards
of health and safety and environmental stewardship. Consistent with our strategy, we aim to flare zero
gas and reduce carbon dioxide emissions as much as possible. In 2022, we established a Board-level
ESG committee with a remit to build on and improve our environmental processes and policies. We are
aware of the changing regulatory landscape in the UK, particularly around incorporating disclosures
under the Task Force on Climate-Related Financial Disclosures (TCFD) to LSE main board companies.
We will comply with any requirements imposed by AIM.
21
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Board of Directors
The current Board consists of three directors: two independent non-executive directors and an
executive director.
Paul Haywood | Chief Executive Officer
Committee Memberships: Nominations Committee, ESG Committee, HSE Committee.
Paul is the founder of Block Energy and has more than 12 years’ experience in the Georgian oil and
gas sector, having identified, managed and completed the acquisition, development and sale of several
oil and gas assets before establishing Block Energy. More broadly, Paul has spent much of his career
building growth projects, leveraging a cross-functional skill set encompassing strategy, implementation,
capital and transaction management. Paul is currently a non-executive director of AIM quoted Synergia
Energy plc, where he is Chairman of the Remuneration Committee and resource focused advisory firm,
Plutus Strategies.
Key skills and competencies: Vast capital markets and energy experience, Georgia knowledge and
strong project delivery record.
Philip Dimmock | Non-Executive Chairman
Committee memberships: Remuneration Committee (Chair); Nominations Committee (Chair); Audit and
Risk Committee; Disclosure Committee; Technical Committee; HSE Committee (Chair)
Philip spent a significant part of his career at BP in a wide variety of senior positions, including manager
of the Forties oil field. Subsequently, his executive roles included Vice President International/Managing
Director UK at Ranger Oil Ltd/Canadian Natural Resources and Vice President Operations at Vanco
Energy. In non-executive board positions, Philip was a director of Nautical Petroleum plc and the Senior
Independent Director of Gulf Keystone Petroleum Ltd. He currently serves as Adviser to Oando Energy
Resources Inc. Philip has an MA in Physics from the University of Oxford.
Key skills and competencies: extensive oil and gas sector experience and knowledge, career board
member
Jeremy Asher | Senior Independent Non-Executive Director
Committee memberships: Audit and Risk Committee (Chair); Nominations Committee; Remuneration
Committee; Disclosure Committee
Jeremy is Chairman & CEO of Tower Resources plc. In recent years he served as a director of NYSE-
listed Pacific Drilling SA, Deputy Chairman of London-listed Gulf Keystone Petroleum Ltd, and as a
director of TASE-listed Oil Refineries Ltd. Previously he co-headed the global oil products business at
Marc Rich & Co (now Glencore AG) and then acquired and developed a 275,000 b/d oil refinery in
Germany, before serving as CEO of PA Consulting Group and advising and investing in numerous
companies in the energy sector. He holds a BSc (Econ) from the London School of Economics and an
MBA from the Harvard Business School.
Key skills and competencies: extensive oil and gas sector experience, professional consultant and
manager
The Strategic Report was approved by the Directors and signed on behalf of the board on the 10th May
2023.
Paul Haywood
Director
22
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Report of the Directors
The Directors present their report and the audited financial statements of Block Energy plc (“the
Company”) for the year ended 31st December 2022.
Principal Activity
The Company's principal activity is oil and gas exploration, development and production.
Incorporation and Admission to Trading on AIM
The Company was incorporated on 8th February 2005 and was admitted to trading on AIM on 11th June
2018.
Results and Dividends
The results for the year are set out on page 13.
This Report covers the year ended 31st December 2022.
The Directors do not recommend the payment of a dividend (2021: $nil).
Review of Business and Future Developments
A review of the business and likely future development of the Company is set out in the Chief Executive
Officer’s Statement on pages 9-11.
Going Concern
The Directors have prepared cash flow forecasts for a period of 24 months from the date of signing
these financial statements. The Group’s forecasts are reviewed regularly to assess whether any actions
to curtail expenditure or cut costs are required.
The Group’s operations presently generate sufficient revenues to cover operating costs and capital
expenditures, supporting the continued preparation of the Group’s accounts on a going concern basis.
The Directors are nevertheless conscious that oil prices have been volatile during the past few years,
and could rise further but could also fall back in the year ahead, and that future production levels depend
on both depletion rates from existing wells and the success of future drilling. As part of
their going concern assessment, the Directors have examined multiple scenarios in which oil prices
and/or future production levels fall substantially and have concluded that it remains possible that future
revenues in at least some scenarios might not cover all operating costs and planned capital
expenditures, creating a material uncertainty that may cast doubt over the Group’s ability to continue
as a going concern. Whilst acknowledging this material uncertainty, the Directors remain confident of
making cost savings if required and, therefore, the Directors consider it appropriate to prepare the
financial statements on a going concern basis. The financial statements do not include the adjustments
that would result if the Group were unable to continue as a going concern.
Risk Management
Risk management is integral to the business, with management continuously monitoring and managing
risk within the relevant business areas. Every material decision is preceded by evaluating the applicable
commercial and operational risks. Regular risks and management reviews are undertaken and
presented to the Board. The Group maintains an Audit and Risk Committee and a Risk Register.
Principal Risks and Uncertainties
The principal risks the Board has reviewed are disclosed on pages 14-18 of this Report.
Share Capital
Details of shares issued by the Company during the year are set out in Note 18 to the Financial
Statements.
Directors and Directors’ Interests
The Directors of the Company who served during the year ended 31st December 2022 are listed below,
and the current Board member’s biographies are on page 22 of this Report.
23
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Paul Haywood
Chief Executive Officer
William McAvock
Chief Financial Officer (resigned 30th September 2022)
Philip Dimmock
Independent Non-Executive Chairman
Jeremy Asher
Independent Senior Non-Executive Director
Kenneth Seymour
Independent Non-Executive Director (resigned 12th January 2023)
Details of the Director’s interests in shares are disclosed on pages 37-38 of this Report.
Director’s and Officers’ Liability Insurance
The Group provided director’s and officer’s liability insurance at a cost of $30,240 (2021: $28,000).
Statement of Director’s Responsibilities
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under the
law, the Directors have elected to prepare the Group and Company financial statements in accordance
with UK adopted International Accounting Standards. Under company law, the Directors must only
approve the financial statements if they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors
are also required to prepare financial statements in accordance with the rules of the London Stock
exchange for companies trading securities on AIM.
In preparing these 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 UK-adopted international accounting standards have been followed,
in accordance with the provisions of the Companies Act (2006), subject to any material
departures disclosed and explained in the financial statements; and
• Prepare the financial statements on a going concern basis unless it is inappropriate to assume
that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s transactions and disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the financial statements comply with the
requirements of the Companies Act (2006). They are also responsible for safeguarding the assets of
the Company and that they are taking reasonable steps for the prevention and detection of fraud or
other irregularities.
Website Publication
The Directors are responsible for ensuring the Annual Report and Financial Statements are made
available on a website. Financial statements are published on the Company’s website in accordance
with the relevant legislation in the United Kingdom governing the preparation and dissemination of
financial statements, which may vary from legislation in other jurisdictions. The maintenance and
integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the Financial Statements contained therein.
Governance Statement
We have chosen to adhere to the Quoted Companies Alliance Corporate Governance Code for Small
and Medium Size Quoted Companies (2018 version); (“QCA Code”). Our full statement of compliance
with the QCA Code is provided in the Governance Report on pages 26-33 of this Report.
Section 172 (1) Statement and Engagement With Stakeholders
How we comply with Section 172 of the Companies Act 2006 and engage with Stakeholders is set out
in the Statement of Corporate Responsibility on pages 20-21 of this Report.
24
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Engagement With Shareholders
The Directors attach great importance to maintaining good relationships with shareholders and the
Company is active in regularly communicating with both its institutional and private shareholders. The
Company also issued regular updates to shareholders. Market sensitive information is notified in
accordance with the AIM Rules and the Market Abuse Regulation.
Political Contributions
During the year ended 31st December 2022, political donations totalled $nil (2021: $nil).
Financial Instruments
The main financial risks arising from the Group’s activities are liquidity risk, commodity price risk,
increased costs and currency risk. These are monitored by the Board in line with the Company’s Risk
Register.
Budgets and cashflow forecasts are regularly prepared and fund-raising initiatives undertaken as and
when required. Risk is inherent in the nature of the business and is managed to the best of the Board’s
ability. Further details on financial instruments are shown in note 23.
Auditors and Disclosure of Information to Auditors
All of the current Directors have taken all of the steps that they ought to have taken to make themselves
aware of any information needed by the relevant Auditors for the purposes of their audit and to establish
that the Auditors are aware of that information. The Directors are not aware of any relevant audit
information of which the Auditors are unaware.
PKF Littlejohn LLP were appointed on 30th September 2022 to replace the outgoing auditors BDO LLP
following a procurement process and they have expressed their willingness to continue in office and a
resolution to re-appoint them will be proposed at the Annual General Meeting.
The Report of the Directors was approved and authorised for issue on 10th May 2023.
Paul Haywood
Director
25
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Governance Report
Corporate Governance Statement
We believe in the value and importance of good corporate governance and our accountability to our
stakeholders, shareholders, staff, contractors, clients, suppliers, and the communities we operate.
High standards of Corporate Governance were maintained in 2022, continuing into the current year,
The Board meets every two months for a thorough review all aspects of the business and the strategy
and in between to consider and approve individual investment decisions or extraordinary situations.
The Board Committees also meet frequently.
QCA Corporate Governance Code (2018)
From 28th September 2018, AIM Rules require AIM quoted companies to apply a recognised corporate
governance code. We have chosen to adhere to the Quoted Companies Alliance’s Corporate
Governance Code for Small and Mid-Sized Companies (“QCA Code”) to meet the requirements of AIM
Rule 26.
The QCA Code is constructed around ten broad principles and disclosures. The QCA has stated what
it considers appropriate arrangements for growing companies and asks companies to explain how they
are meeting the principles through the prescribed disclosures. The Governance Report describes how
the Company follows the ten principles of the QCA Code, quoted in the headings below, as specified in
the AIM rules for companies published by the London Stock Exchange.
QCA Code Principles & the Company’s Response
Principle One: ‘Establish a strategy and business model which promotes long-term value for
shareholders’.
Block Energy aims to build on its position as the leading independent oil and gas producer in Georgia
by realising the potential of previously discovered fields suited for deploying advanced subsurface,
drilling and production technologies. The Company is developing valuable intellectual property with
regard to the specific geology of the region it operates in and is undertaking exploration activities within
the portfolio.
Georgia is a stable, business friendly country (7th in the World Bank’s ‘Ease of Doing Business’ Index)
with proven but underdeveloped reserves and resources of oil and gas and is of increasing interest to
major oil and gas companies.
The Company has working interests in five licences: XIB (100%), XIF (100%), IX (100%), Norio (100%)
and Satskhenisi (90%). All are within the region’s Kura basin, which has historically had significant
discoveries of oil.
We have designed a robust business model to implement our strategy:
• The Company raised a total of £22 million ($29 million) between June 2018 and December
2020 to fund a drilling, development and commercialisation programme primarily associated
with production from the West Rustavi/Krtsanisi oilfield. We acquired a proprietary 3D seismic
survey over the West Rustavi portion of the West Rustavi/Krtsanisi field in 2019 and, following
the acquisition, in 2020, of Block XIB, which includes the Krtsanisi portion of the West
Rustavi/Krtsanisi field, the Company integrated the 3D seismic data acquired across XIF and
XIB and performed a complete re-interpretation. The Company has drilled six wells in West
Rustavi/Krtsanisi since 2018 and deepened one in the Patardzeuli field. The Company has also
undertaken 110 workovers consisting of over 940,744 operational hours (2020/1/2),
constructed oil and gas processing facilities, and sales infrastructure, and undertaken
geological and other subsurface studies across three projects.
• Successful execution of the Company’s business plan requires a management and technical
team with extensive knowledge of Georgia’s oil and gas sector, legal and regulatory
26
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
environment and geological setting Block Energy is led by a management team with deep
experience both in Georgia and across the international oil and gas industry and its operations
and subsurface team have significant expertise in developing naturally fractured reservoirs
analogues to those in Georgia.
• The Company’s principal technical challenges are associated with determining economically
efficient methods of extracting the proven oil and gas within its assets, whilst managing and
where possible, mitigating execution risks. The Company utilises proven and cost-effective
technologies in this endeavour and allocates the time and resources required to risk and rank
the opportunities across its portfolio, leading to the planning and execution of risk management.
The Company has been operating in Georgia since 2017 and has built a strong body of
knowledge which it draws upon to mitigate the risks associated with asset development.
• All of our operations are conducted within a robust HSES framework, with a full-time HSE
department, Board level HSE and ESG Committees and HSES performance targets in the Key
Performance Indicators of senior executives and managers. The Company places a great
emphasis on HSES and it is a daily topic for senior management and for operational personnel.
All staff and contractors working on-site are made aware of the importance that the Board place
on HSES.
• The Board recognise the importance of developing effective communication channels with
current and prospective investors. We regularly update the market as appropriate with
announcements which are posted on our website as soon as they appear on the London Stock
Exchange’s Regulatory News Service (“RNS”). We distribute the RNS announcements and
other Block and industry news through a mailing list and social media and continue to make the
Company’s business case at investor meets and with institutional investors in the UK and
internationally. We post video updates and interviews with the executive and senior
management. All of our communications are available on our website and social media and we
aim to meet our major institutional investors regularly. We contract an experienced financial
communications company to assist with our communications activities.
• The Company continuously investigates and evaluates new production and exploration
opportunities in Georgia, regionally and internationally. We maintain a robust M&A screening
framework and assess opportunities from a technical, commercial, economic and strategic
perspective. We are an ambitious operating company and seek to grow our portfolio both
organically and inorganically.
Principle Two: ‘Seek to understand and meet shareholder needs and expectations’.
The Board strives to keep shareholders informed with clear and transparent information on the
Company’s operations, strategy and financial position. Details of all shareholder communications are
provided on the Company’s website, in accordance with AIM Rules. RNS updates, reports, circulars,
videos, podcasts and presentations are all published on the Company’s website or social media
channels.
Primary responsibility for investor relations rests with the Chief Executive Officer, supported by the other
Directors and senior management. Since Block Energy began trading on AIM on 11th June 2018, the
Company has used multiple channels to understand the needs and expectations of its shareholder
base.
The AGM is our principal forum for dialogue with shareholders, and we encourage all shareholders to
attend and participate. The Notice of Meeting is sent to shareholders at least twenty-one days before
the meeting. Whenever possible, the Chair of the Board and all Committees attend the AGM and are
available to answer questions raised by shareholders. Shareholders vote on each resolution by way of
a poll. We announce the number of votes withheld, received for and against each resolution and publish
them on our website.
In addition to maintaining digital communications channels the Company maintains a dedicated email
address (info@blockenergy.co.uk) which investors can use to contact the Company. This address is
displayed prominently on our website, together with an online enquiries form and our address and
27
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
telephone number. All enquiries received are reviewed and distributed as appropriate. We also contract
an experienced financial communications company to assist with our communications activities.
The Directors continually review our engagement with shareholders and our communications approach.
The Directors take every opportunity to communicate our objectives, strategy and business plan to
existing and potential institutional investors. We routinely make presentations to institutions and industry
analysts, particularly after the announcement of significant news. We keep in touch with institutional
investors through a combination of formal meetings, participation at investor conferences, roadshows
and informal briefing with management. The majority of meetings with shareholders and potential
investors are arranged by the Company’s brokers or directly with the Company. The brokers provide
frequent feedback to the Company to assist in understanding sentiment and market expectations.
Principle Three: ‘Take into account wider stakeholder and social responsibilities and their
implications for long-term success’.
We understand that our long-term success depends on our relationships with our stakeholders. We set
out our stakeholder engagement process in our Statement of Corporate Responsibility on pages 20-22
of this Report.
Principle Four: ‘Embed effective risk management, considering both opportunities and threats,
throughout the organisation’.
The Board is responsible for putting in place and communicating robust systems to manage risk and
implement internal control. We recognise that risk management is an essential business practice: we
work to balance risk and return, threat and opportunity.
Audit and Risk Committee
The Audit and Risk Committee meets to consider the scope of the annual audit and the interim financial
statements and to assess the effectiveness of the Company’s system of internal controls. It reviews the
results of the external audit, its cost effectiveness and the objectives of the auditor. Given the present
size of the Company, the Audit and Risk Committee considers that an internal audit function is not
currently justified. The Audit and Risk Committee currently comprises Jeremy Asher (Chair) and Philip
Dimmock. During 2022, it comprised Jeremy Asher (Chair) and Ken Seymour.
Remuneration Committee
The Remuneration Committee reviews the performance of the Executive Director and makes
recommendations to the Board on matters relating to his remuneration and terms of employment. The
Remuneration Committee also makes recommendations to the Board on proposals for granting share
options and other equity incentives pursuant to the share option scheme. The Board sets the
remuneration and terms and conditions of appointment of the non-executive Directors of the Group.
The Executive Director is invited to attend for agenda items that require his contribution, although he
does not take part in any discussion on his own benefits and remuneration. The Remuneration
Committee currently comprises Philip Dimmock (Chair) and Jeremy Asher. During 2022 it comprised
Ken Seymour (Chair) and Jeremy Asher.
Nominations Committee
The Nominations Committee considers appointments to the Board, senior management positions and
succession planning. The Nominations Committee currently comprises Philip Dimmock (Chair), Jeremy
Asher and Paul Haywood. During 2022 it comprised Philip Dimmock (Chair), Jeremy Asher and Paul
Haywood.
28
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Disclosure Committee
The Disclosure Committee has the primary responsibility and authority to make decisions on disclosure
delay for the purposes of MAR. The Disclosure Committee currently comprises Jeremy Asher (Chair)
and Philip Dimmock. During 2022 it comprised Jeremy Asher (Chair), Philip Dimmock and William
McAvock.
Technical Committee
The Technical Committee meets every two months, and sometimes more frequently on an informal
basis, to consider surface and sub-surface technical and operational matters. The Technical Committee
currently comprises Ken Seymour (non-Board Chair) and Philip Dimmock. During 2022 it comprised
Ken Seymour (non-Board Chair) and Philip Dimmock.
Health, Safety and Environment (HSE) Committee
The HSE Committee was established in 2022 and Terms of Reference for the Committee were adopted
by the Board. The HSE Committee meets at least quarterly and reviews the Company’s HSE policies,
performance and goals. The Committee meets in the event of any serious HSE lapse to review the
causes and identify remedial action. The HSE Committee currently comprises Philip Dimmock (Chair),
Paul Haywood, Ken Seymour (non-Board Member) and Mamuka Kharabadze (non-Board Member).
During 2022 it comprised of Phillip Dimmock (Chair), Ken Seymour and Paul Haywood.
Environmental, Social and Governance (ESG) Committee
The ESG Committee was established in 2022 and Terms of Reference for the Committee were adopted
by the Board. The ESG Committee meets frequently and reviews the Company’s environmental and
social impact, including monitoring the Company’s emissions, any unplanned flaring of gas and the
Company’s social impact. The ESG Committee currently comprises Ken Seymour (Non-Board Chair),
Paul Haywood and Mamuka Kharabadze (non-Board Member). During 2022 it comprised Ken Seymour
(Chair), Paul Haywood and Simon Barry (non-Board Member).
Principle Five: ‘Maintain the Board as a well-functioning, balanced team led by the Chair’.
The members of the Board have a collective responsibility and legal obligation to promote the
Company's interests and are jointly responsible for defining corporate governance arrangements.
Ultimate responsibility for the quality of, and approach to, corporate governance lies with the Chairman.
The Board currently consists of three Directors, one of whom is an executive and two independent non-
executives (including the Chairman). The Board has established a set of committees to support its work
as described in this Report.
Board meetings are held regularly. All Executive and non-executive directors are required to attend and
make every effort to attend in person. They are also required to be available at other times as necessary
for face-to-face and telephonic and video conference meetings with staff and investors.
Executive and non-executive Director attendance at Board and committee meetings during the year
ended 31st December 2022 is summarised below:
29
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Board
Meetings
Audit and
Risk
Committee
11/11
11/11
11/11
11/11
2/2
2/2
-
2/2
9/9
-
Director
Philip
Dimmock
Jeremy
Asher (1)
Paul
Haywood
Ken
Seymour
(2)
William
McAvock
(3)
Notes –
Remuneration
Committee
Nominations
Committee
Technical
Committee
HSE
Committee
ESG
Committee
4/4
4/4
-
3/4
-
1/1
1/1
1/1
-
-
9/9
-
-
9/9
-
2/2
-
2/2
2/2
-
-
-
4/4
4/4
-
(1) Appointed as a Director on 12th August 2021 and appointed to the Audit and Risk Committee on 13th August 2021, and to the
Remuneration Committee, Nominations Committee, and Disclosure Committee on 8th December 2021.
(2) Appointed as a Director on 7th September 2021 and appointed to the Audit and Risk Committee, Remuneration Committee,
Technical Committee, ESG Committee, and HSE Committee on 8th December 2021.
(3) Resigned as a Director on 30th September 2022.
The Board follows a schedule of regular business, financial and operational matters and each
committee has compiled a schedule of work to ensure that all areas for which the Board has
responsibility are addressed and reviewed during the period. The Chairman is responsible for ensuring
Directors receive accurate, sufficient and timely information to facilitate their decision making. The
Company’s Board Meetings are minuted and any papers presented are included in the final minuted
Board pack. Directors are aware of the right to have any concerns minuted and to seek independent
advice at the Company’s expense where appropriate.
The Board has at least one formal meeting every two months. Papers are issued covering the full range
of subjects of interest to the Board in good time for review prior to each meeting. The Directors also
dedicate time to committee meetings. The committees meet based on their own schedules and more
frequently if there is a specific requirement. The Directors will attend the AGM whenever possible and
will review the Annual Report and Statement of Accounts in preparation. The Directors also visit Georgia
regularly to meet staff and stakeholders. In addition to these formal events, the Directors frequently
discuss day-to-day Company matters in person and by conference call. The number of days committed
to the Company is challenging to quantify because the Directors make themselves available as
required.
The Board believes its blend of experience, skills, personal qualities and capabilities is sufficient to
enable it to execute the Company’s strategy successfully. The Directors attend seminars and other
regulatory and trade events to help ensure their knowledge remains current, as well as receiving advice
from the Company’s professional advisors.
The Board has established a Nominations Committee which meets at least twice a year. As well as
making appointments to the Board, it maintains a list of candidates for potential future selection.
Principle Six: ‘Ensure that between then the Directors have the necessary up-to-date experience,
skills and capabilities’.
Together, the Directors have broad and deep experience in the governance of publicly listed companies,
HSES management, well and production operations, petroleum reservoir engineering, oil and gas field
development, contractual negotiation, commercial and financial experience and government and
community relations. Two of our Directors have previous experience working in Georgia and all of our
Directors have publicly listed company board experience.
30
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Profiles of our executive and non-executive Directors demonstrating their suitability for the
responsibilities which they have been entrusted with are available in this Report and on our website.
All of our Directors accept personal responsibility for undertaking continuous professional development
through means including seminars, conferences and self-directed study to understand and take
advantage of the most recent developments in the sector, whether technical, commercial or related to
governance.
The Nominations Committee continues to assess the suitability of the Board’s skills and expertise for
developing and implementing the Company’s strategy and, when warranted, will appoint new directors
with the required skills.
The Board is kept abreast of developments of governance and AIM regulations and is in regular contact
with the Company’s Nominated Advisor. In the course of a new Director being appointed, the Company’s
Nominated Advisor provides training and support on the AIM Rules for companies.
The Directors have access to the Company’s Nominated Advisor, lawyers and auditors as and when
required and are able to obtain advice from other external bodies when necessary.
Principle Seven: ‘Evaluate board performance based on clear and relevant objectives, seeking
continuous improvement’.
The performance of each member of the Board (and senior management) is evaluated to assess their
contribution to the Company’s success. The Board is collectively responsible for the evaluation of the
performance of each member. The Executive Director is incentivised to seek continuous improvement
and innovation through remuneration schemes linked to share price and, ultimately, Company
performance.
It is intended that a questionnaire method of measuring the performance of the Board will be introduced
for the financial year ending 31st December 2023.
Principle Eight ‘Promote a corporate culture that is based on ethical values and behaviours’.
Our core values underpin our long-term growth:
• We continually work to develop and maintain good relationships with all of our stakeholders:
with staff, shareholders, suppliers, national and local governments and the communities within
which our operations are embedded.
• We are an agile and ambitious company. We have a team carefully selected for their skills and
experience, we are committed to our valued and we are dedicated to the successful execution
of our current and future strategy.
• We are committed to employing cost-effective technology and processes to achieve our
objectives and deliver value to our stakeholders.
• We are courteous, honest and straightforward in all our dealings, honouring diversity,
individuality and personal differences and are committed to observing the highest personal,
professional and ethical standards in conducting our business.
• We are acutely conscious of our particular responsibilities as an oil and gas producer. Our
HSES obligations are the first operations-related agenda item at all of our daily and weekly
meetings as well as our Board meetings and we have employed a full-time HSES department
in Georgia to develop and manage our HSES processes.
Our values are expressed and communicated regularly to staff through internal communications and
forums. They are enshrined in employment contracts and evidence of commitment to these values by
candidates is considered as part of the selection process.
31
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
The Board believes that the promotion of our core values across the Company’s operations gives Block
a critical competitive advantage, improving our internal efficiency and the quality of our stakeholder
relationships.
Principle Nine ‘Maintain governance structures and processes that are fit for purpose and
support good decision making by the Board’.
The Board provides the Company’s strategic leadership and operates within the scope of a robust
corporate governance framework. It ensures delivery of long-term shareholder value by setting and
promoting the culture, values and practices that operate throughout the business, and defining the
Company’s strategic goals. The Board delegates certain defined responsibilities to its Committees. The
Chair of each committee reports its activities to the Board.
The Chairman has overall responsibility for the quality of corporate governance. The Chair:
• Leads and chairs the Board;
• Ensures that Committees are properly structured and operate within appropriate Terms of
Reference;
• Ensures that the performance of individual Directors, the Board and its Committees are
reviewed on a regular basis;
• Leads the development of strategy and the setting of objectives;
• Oversees communication between the Company and its shareholders and stakeholders.
The Chief Executive Officer (“CEO”) oversees the coherent leadership and management of the
Company. The CEO:
• Leads the developments of objectives, strategies and performance standards as agreed by the
Board;
• Monitors, reviews and manages key risks and strategies with the Board;
• Ensures that the Company’s assets are secured and safeguarded;
• Leads on investor relations activities to ensure the Company’s standing with shareholders and
financial institutions is maintained;
• Ensures that the Board is aware of the views and opinions of employees on relevant matters.
The CEO is responsible for implementing and delivering the operational decisions agreed by the Board
making operational and financial decisions required in the day-to-day operation of the Company,
providing executive leadership to managers, championing the Company’s core values and promoting
talent management.
The independent non-executive Directors contribute independent thinking and judgement through the
application of their external experience and knowledge, scrutinising the performance of management,
provide constructive challenge to the Executive Director and ensure that the Company is operating
within the governance and risk framework approved by the Board.
The CEO is responsible for providing clear and timely information flow to the Board and its committees
and the Company Secretary and Legal Counsel support the Board on matters of corporate governance
and risk.
The matters reserved for the Board are:
• Setting long-term objectives and commercial strategy;
• Approving annual operating and capital expenditure budgets;
• Monitoring the implementation of the HSES Policy and Management Plan;
• Changing the share capital or corporate structure of the Company;
• Approving results and reports;
• Approving dividend policy and the declaration of dividends;
• Approving major investments, disposals, capital projects or contracts;
• Approving resolutions to be put to general meetings of shareholders and the associated
documents or circulars;
• Approving changes to the Board structure.
32
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
The Board has adopted the QCA Code as its governance framework against which this statement has
been prepared. The Board monitors the suitability of this Code on an annual bases and will consider
any relevant revisions to its governance framework as appropriate as the Company evolves.
The Board’s Committees are described in detail on pages 28-29 of this Report.
Principle Ten: ‘Communicate how the company is governed and is performing by maintaining a
dialogue with shareholders and other relevant stakeholders’.
All historical annual reports, notices of general meetings and other corporate governance related
material are available on our website. We publish information on the activities of our Board Committees
within our annual reports. We highlight our adoption of the QCA Code and disclose in detail our
corporate governance policies and strategies, our view on risks and opportunities and our financial
information. We seek to discuss governance issues with shareholders and relevant stakeholders where
possible and maintain regular dialogue with our advisors over these issues and any concerns that
shareholders or stakeholders may have.
If there is a resolution passed at a General Meeting with 20% or more votes against, the Company will
seek to understand the reason for the result and, where appropriate, take suitable action.
33
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Remuneration Report
The Remuneration Committee currently comprises Philip Dimmock (Chair) and Jeremy Asher. This
Remuneration Report covers the year ended 31st December 2022 when the Committee comprised Ken
Seymour (Chair) and Jeremy Asher (Member). Dr. Seymour left the Committee on 10th January 2023,
when he stepped down from the Board to become Chief Operating Officer. At times, Paul Haywood
attended as a guest, and other Directors attended on an ad hoc basis. During the year, the
Remuneration Committee met seven times.
Remuneration Policy
The Remuneration Committee, in forming its policy on remuneration, gives due consideration to the
needs of the Group, the shareholders and the provisions of the QCA and Corporate Governance Codes.
The ongoing policy of the Remuneration Committee is to provide competitive remuneration packages
to enable the Group to retain and motivate its key executives and to incentivise them to deliver long-
term shareholder value cost-effectively.
The Remuneration Committee keeps itself informed of relevant developments and best practice in the
field of remuneration and seeks advice where appropriate from external advisers. It maintains oversight
of the remuneration of staff, which is the responsibility of the Chief Executive Officer.
The Remuneration Committee aims to reward key executives for delivering value for the Group and
shareholders. The Remuneration Committee also applies the broader principle that Block Energy’s
executive remuneration should be competitive with the remuneration of Directors of comparable
companies.
The remuneration policy for the non-executive Directors is determined by the Board, considering best
practices and the Articles of Association.
Components of the Remuneration Package
The main components of the remuneration package for executive Directors and senior management
are:
• Base salary;
• Pension and other benefits;
• Performance-related annual cash bonus scheme; and
• Long-term incentive plan (“LTIP’’).
Base salary
The policy is to pay a fair and reasonable base salary, set around the median level of comparable
companies. Generally, the base salary is reviewed annually by the Remuneration Committee, regarding
the performance of the Company and economic conditions and considering any changes to an
individual’s job scope.
The Company responded to the collapse in Brent oil price from c. $60 per barrel to less than $20 per
barrel in April 2020, caused by a decrease in demand during the Covid-19 pandemic, by agreeing to a
salary sacrifice scheme with its Directors and senior management. With effect from 1st April 2020, 40%-
50% of their salary or fees was paid in nil-cost options to acquire Ordinary Shares in the Company,
reducing monthly cash salary costs.
Whilst oil prices significantly improved in 2022 to an average of $101 per barrel, the salary sacrifice
scheme was continued as one of the measures to support the Company’s primary strategic focus on
drilling new wells. The number of options granted each month was based on the shares valued at a
volume-weighted average price (“VWAP”) over the monthly salary period.
34
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
The cash salary sacrifice scheme continued into 2023 but was terminated on 1st April 2023 after well
WR-B01Za was brought onto production, improving the Company’s monthly cash flow.
A cost-of-living increase in base salary of 5% was awarded to the CEO and all staff effective 1st January
2022. Executive Directors took the increase in cash and nil-cost options in the same proportion as base
salary.
Pension and other benefits
The Company contributes 10% of base salary to executive directors' pensions.
During 2023, the company is considering providing other benefits, such as life cover, for some of its
employees.
Performance-related cash bonus scheme
Each year, the Remuneration Committee develops a set of individual and corporate key performance
indicators (“KPIs”) to measure performance accurately and consistently and of rewarding performance
appropriately.
For executives and staff, the KPIs are weighted 60% for the individual and 40% for corporate. The CEO
has up to 100% of his base salary available for a bonus payment. During 2022, the Remuneration
Committee resolved that 150% of a KPI element would be awarded for the achievement of a stretch
target. Nevertheless, the maximum bonus for the CEO remains at 100% of base salary.
During 2022 the CFO’s role became redundant, and no KPIs were set. Other senior managers can
receive up to 50% of their base salary as a bonus.
For each KPI, performance measures are established for Threshold, Target and Stretch levels. There
is also a provision for a degree of discretion for the board of Directors, including circumstances where
no bonuses will be paid regardless of performance. In the event of a death in service, no bonus will be
delivered to the CEO.
The bonus payments made in February 2023 were for the year ended 31st December 2022 and were
accrued in the 2022 accounts. In keeping with the current practice of preserving as much cash as
possible for operations, these bonuses were paid mainly in the form of nil cost share options in lieu of
money. The next bonus payments are planned to be paid in early 2024, depending on the economic,
environmental conditions and the financial resources of the Company at that time, and will be for the
year ending 31st December 2023.
Description of Corporate KPIs for the year ended 31st December 2022
• HSES - sought to reward top performance across all business sections and was measured by
the number of lost time incidents. During the period, there were no major lost time incidents,
and the Stretch measure was achieved.
• Production – ambitious production targets were set. The Threshold measure was not reached.
• Work Programme – targets set for in country operations, including drilling wells. The Target
level was achieved.
• Subsurface Studies – targets set for subsurface studies, including CPRs and FDPs. A Target
level was achieved.
• Budget – encouraged meeting or coming under the agreed financial budget by setting targets
for costs being below the budget. A Stretch level was achieved.
Description of Chief Executive Officer’s individual KPIs for the year ended 31st December 2022
• Business Development and New Ventures – given the company’s stated aim of becoming one
of Georgia’s leading oil and gas companies, there needs to be a concerted effort in building
35
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Block Energy’s portfolio. Therefore, targets are designed to motivate the building of Block
Energy’s portfolio. The Target measure was achieved.
• Strategic Financing – growing the business requires sourcing additional funding. The Target
measure was achieved by various term sheets and potential transactions, one of which was
completed post year-end.
Description of Chief Financial Officer KPIs for the year ended 31st December 2022
The Chief Financial Officer resigned from the Board on 30th September 2022, as a consequence of the
Company’s decision to make this position redundant, as part of the Company’s continuing efforts to
improve efficiency across its business. He continued as an employee until 13th December 2022. No
KPIs were set in 2002 for the former CFO, however, following the Committee’s recommendation, the
board of Directors agreed to use discretion to extend the expiry date of the former CFO’s long-term
incentive plan options by six and a half months to 30th September 2023.
Description of KPIs for the year ending 31st December 2023
For 2023, the KPIs for the CEO have been aligned with the Company’s objectives for the year ended
31 December
of Individual
KPIs remains at 60% and the weighting of Corporate KPIs remains at 40% of the total. At the Corporate
Level, the KPIs are based on production, work programme and cost management, in addition to HSE
excellence.
both Corporate and Individual levels. The weighting
2023
at
At the individual level, KPIs for the Chief Executive Officer are based on the New Ventures, Strategic
Financing, Risk Management and HSE & Governance Leadership.
Long-Term Incentive Plan (“LTIP”)
The LTIP aligns executive Director interests with those of shareholders and drives superior long-term
performance. Under the LTIP, executive Directors and other members of the management team may
be awarded share options that vest over a three-year period and have an exercise period of ten years.
The vesting of any LTIP awards granted to executive Directors continues to be conditional on certain
performance milestones being satisfied.
In April 2022, the CEO was awarded 14.5 million share options from a total of 42 million awarded to
staff. These LTIP options have exercise price of 1.325p per share, an expiry date ten years from the
date of grant, and vest by one-third on each of the first, second and third anniversaries of the date of
grant. The ones awarded to executive Directors have operational performance conditions to their
vesting.
36
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Directors’ Remuneration
Salary
Bonus
Fees
Pension
Termination
Non-Executive Directors
Jeremy Asher1
Christopher Brown2
Philip Dimmock
David Sandroshvili2
Kenneth Seymour3
Charles Valceshini2
Subtotal
Executive Directors
Paul Haywood
William McAvock4
Subtotal
Total
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
37,484
-
57,475
-
37,484
-
132,443
$
-
-
-
-
-
-
-
250,141
180,102
178,197
-
428,338
180,102
-
-
-
25,014
13,400
38,414
Year
ended
Year
31st
ended 31st
December
December
2022
Total
$
37,484
-
57,475
-
37,484
-
2021
Total
$
16,000
23,206
63,366
24,636
13,192
40,186
132,443
180,586
LTIP
$
-
-
-
-
-
-
-
104,019
559,276
567,515
$
-
-
-
-
-
-
-
-
37,484
67,474
296,555
378,098
37,484
171,493
855,831
945,613
428,338
180,102
132,443
38,414
37,484
171,493
988,274
1,126,199
1 Appointed as a Director on 12th August 2021.
2 Resigned as a Director in prior year.
3 Resigned as a Director on 10th January 2023 to take up the new role of Chief Operating Officer.
4 Resigned as a Director on 30th September 2022 but continued as an employee until 13th December 2022. During this time as
an employee William McAvock received an additional $39,188 in salary and $3,596 in pension contributions.
During eight months of 2021 and all of 2022, non-executive Directors took 50% of their fees in share options while executive
Directors took 40% of their salaries in share options rather than in cash. At various times, Directors elected to exercise these
options, paying the necessary income tax, but no Director has sold the resulting shares during his engagement as a Director or
as an employee.
Directors’ Interests in Shares
The directors who held office at the end of the year had the following interests in the Ordinary Shares
of the Company:
Non-Executive Directors
Jeremy Asher
Philip Dimmock
Kenneth Seymour
Sub-total
Executive Directors
Paul Haywood
Sub-total
Total
31st December 2022
31st December 2021
1,353,503
2,794,508
1,780,166
5,928,177
12,544,381
12,544,381
592,445
1,678,289
1,019,108
3,289,842
12,544,381
12,544,381
18,472,558
15,834,223
37
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
The Directors held 2.71% of the total share capital of the Company at 31st December 2022 (2021:
3.04%).
Directors’ Interests in Options
The Directors who held office at the end of the year had the following interests in options to acquire
Ordinary Shares of the Company:
Non-Executive Directors
Jeremy Asher
Philip Dimmock
Kenneth Seymour
Sub-total
Executive Directors
Paul Haywood
Sub-total
Total
31st December 2022
31st December 2021
-
928,612
-
928,612
47,595,359
47,595,359
247,296
732,700
208,646
1,188,642
16,320,890
25,751,168
48,523,971
26,939,810
During both years, all of the options received by non-executive Directors and some of the options
received by the executive Director were nil cost options issued under the salary sacrifice scheme in lieu
of cash payment of 40%-50% of salary/fees.
On 3rd February 2022, the Company announced that its Non-Executive Directors had entered into an
agreement to exercise future options immediately upon grant.
A detailed breakdown of Directors’ interests in options is set out below:
Director
Grant date
Expiry date
Paul Haywood
9th June 2018
Paul Haywood
1st March 2021
11th June 2028
1st March 2031
6th April 2021 to
6th April 2031 to 3rd
Life
(years)
10.0
10.0
Number
Exercise price
7,756,428
6,000,000
Paul Haywood
3rd December 2021
December 2031
10.0
2,564,462
4th January 2022 to
4th January 2032 to
Paul Haywood
1st December 2022
1st December 2032
Paul Haywood
8th April 2022
6th April 2021 to
8th April 2032
6th April 2031 to
Philip Dimmock
3rd December 2021
3rd December 2031
Philip Dimmock
4th January 2022
4th January 2032
10.0
10.0
10.0
10.0
16,774,469
14,500,000
732,700
195,912
48,523,971
Philip Dimmock Chairman of the Remuneration Committee
38
(pence)
4.0
4.0
0.0
0.0
1.325
0.0
0.0
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Independent Auditor’s Report To The Members Of Block Energy PLC
Opinion
We have audited the financial statements of Block Energy plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31st December 2022 which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the
Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent
Company Statements of Cash Flows and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and UK-adopted international accounting standards and as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.
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 31st December 2022 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with UK-adopted
international accounting standards;
the parent company financial statements have been properly prepared in accordance with UK-
adopted international accounting standards and as applied in accordance with the provisions
of the Companies Act 2006; 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 as applied to listed entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty related to going concern
We draw attention to note 1 of the financial statements which notes the reliance upon the oil and gas
production, oil prices and the success of future drilling to generate sufficient revenue to continue to fund
the Groups cash requirements and the impact of potential downside scenarios on the Group’s ability to
cover its ongoing operating costs. Should such downside scenarios occur the Group and Parent
Company would be required to secure further funding. As stated in note 1, these conditions are
necessarily considered to represent a material uncertainty that may cast significant doubt over the
Group's and the Parent Company’s ability to continue as a going concern. Our opinion is not modified
in respect of this matter. In auditing the financial statements, we have concluded that the Directors’ use
of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue
to adopt the going concern basis of accounting and in response to the Key Audit Matter included
evaluating the following:
• We critically assessed the Directors' financial forecasts through comparing actual outcomes in
the current year against prior forecasts. Underlying key assumptions, including revenue,
production volumes, operating and capital expenditure were assessed by considering factors
such as commitments under licences, historical revenue profiles, historical actuals and
39
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
forecasted production levels, and operating expenditure historic actuals in order to assess the
reasonableness of the forecasts.
• We considered the Group’s ability to produce and sell oil and gas at increased levels during a
period of at least twelve months from the date of approval of the financial statements. We
considered sensitivities over various sales volumes.
• We assessed the reasonableness of key assumptions underpinning the forecasts by
reference to Brent crude oil prices, Georgian gas prices, current production sharing
agreements, expenditure and commitments and considered the implications of the trends in
the global economy on the Group. Where appropriate we confirmed the key inputs to publicly
available information and underlying source documentation.
• We performed sensitivity analysis on the cash flow forecast to consider the available
headroom under different reasonably possible scenarios such as a decrease in oil and gas
prices, an increase in exchange rate, lower than anticipated initial production rates from new
wells and additional capex.
• We made enquiries of Management and Directors and reviewed Board minutes and key
operational contracts to assess the completeness of commitments considered in the cash
flow forecasts.
• We evaluated the adequacy of disclosures made in the financial statements in respect of
going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described
in the relevant sections of this report.
Our application of materiality
Entity
Basis for materiality
Materiality
Block Energy Plc – Group
2% of net assets
Parent company
2% of net assets
$589,000
$580,000
The scope of our audit was influenced by our application of materiality. We set certain quantitative
thresholds for materiality. These, together with qualitative considerations, helped us to determine the
scope of our audit and the nature, timing and extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect of misstatements, both individually and
on the financial statements as a whole.
Based on our professional judgement, we consider net assets to be the most significant determinant of
the group’s and parent company’s financial performance used by shareholders as the group continues
to progress its oil and gas development assets and the parent company continues to support the group’s
oil and gas development activities.
Whilst materiality for the financial statements as a whole was set at $589k, significant components of
the group were audited to a level of materiality ranging between $304k - $200k. Performance materiality
for the group and components was set at 70% to ensure sufficient coverage of key balances. We apply
the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. At the planning stage materiality is used to determine the financial statement areas that
are included within the scope of our audit and the extent of sample sizes during the audit.
We agreed with management that we would report to the Audit Committee all individual audit differences
identified during the course of our audit in excess of $29.4k for the financial statements as a whole and
$29k for the parent company. We also agreed to report differences below these thresholds that, in our
view warranted reporting on qualitative grounds.
40
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Our approach to the audit
Our group audit scope focused on the principal area of operation being the UK and Georgia.
Our Group audit scope focused on the companies within the Group which hold the Group’s assets being
Block Energy Plc, Block Norioskhevi Limited, Georgian New Ventures Inc, Block Rustaveli Limited
which were all subject to a full scope audit and Block Operating Company LLC which was subject to an
audit of material balances. Together with the Group consolidation, which was also subject to a full scope
audit, these represented the significant components of the Group. All audit work on the components
was conducted by the Group audit team with the assistance of staff from the local Georgian PKF
Member Firm.
The remaining components of the Group were considered non-significant and were principally subject
to analytical review procedures. These procedures were performed by the Group audit team.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters. In addition to the matter described in the Material uncertainty related to going concern
section we have determined the matters described below to be the key audit matters to be
communicated in our report.
Key Audit Matter
How our scope addressed this matter
Carrying value of oil and gas development assets (note 12)
The Group’s development and production
assets which are categorised within
property, plant and equipment represent the
most significant asset on the consolidated
statement of financial position ($23.4m as at
31st December 2022). Management and the
Directors are required to assess whether
there are any potential impairment triggers
which would indicate that the carrying value
of the assets may not be recoverable for each
cash generating unit.
the
The indicators of impairment assessment in
relation to the development and production
assets under
relevant accounting
standard and the resulting assessment of the
assets’ recoverable amount require the
exercise of significant
judgement by
Management and the Directors. Given the
significance of the assets to the Group’s
consolidated statement of financial position
and the significant management judgements
and estimates involved in this area, we
considered this a key audit matter.
Our work in this area included:
• Reviewing Management’s
36
impairment indicator review paper and
critically challenging the considerations
made regarding indicators of impairment.
IAS
• Obtaining
evidence
the
compliance with licence terms and that
they remain in good standing.
regarding
• Reviewing third party reports obtained from
the Directors and Management’s experts
relating to the reserves and resources
impacting the impairment model.
• Reviewing the CPR in place and assessing
the scope of work, including an evaluation
of
their competence, capabilities and
independence.
review of management’s
A
internal
production forecasts to the CPR in place
and assess the appropriateness of any
differences which arise.
Agreeing the key assumptions used by the
Directors and Management in determining
•
•
41
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
the recoverable amount of the D&P asset
such as oil price and discount rates and
industry averages and
compared
to
benchmarked
these against publicly
information. We considered
available
assumptions such as production levels and
sales in the light of historic results and
underlying agreements such as
the
production sharing agreements.
• Checking the mathematical accuracy of the
value in use calculations.
•
•
Independently developing a reasonable
range of discount rates and compare
those to the discount rate applied by
management in the impairment review.
An assessment of whether management’s
presentation and disclosures relating to
estimation uncertainty are adequate.
Carrying value of investments in subsidiaries and loans due from subsidiary companies in
the Parent Company (Note 4 and 6)
Under International Accounting Standard 36
‘Impairment of Assets’, companies are
required to assess whether there is any
indication that an asset may be impaired at
each reporting date. Key judgements and
assumptions regarding the impairment of
investments include the timing, extent and
probability of future cash flow from its
subsidiary companies.
The Parent Company has loans due from
subsidiary companies of $25m as at 31st
December 2022. The investments represent a
further significant balance of $6.2m on the
Company balance sheet and there is a risk it
could be impaired and that intragroup loans
may not be recoverable as a result of the
subsidiary companies incurring losses.
in
We therefore identified the risk over the
impairment of investments and loans due
from subsidiary companies as a significant
financial
the Parent Company
risk
statements, which was one of the most
significant risks of material misstatement.
Given the significance of the assets to the
Parent Company’s statement of financial
position and the significant management
judgements and estimates involved in this
area, we considered this a key audit matter.
Our work in this area included:
Reviewing the investment balances and
intra group
indicators of
impairment.
loans
for
the appropriateness of
Assessing
the
methodology applied by management in
their assessment of
recoverable
amount of the investments and intragroup
loans by comparing it to the Group’s
accounting policy.
the
Assessing management’s evaluation of the
investments and
the
recoverability of
intragroup loans including the review of the
underlying production assets that support
the recoverability of the loans.
Checking that intragroup loans have been
reconciled and confirm that there are no
material differences; and
Considering
disclosures
statements.
the
included
appropriateness
the
of
financial
in
•
•
•
•
•
42
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information
contained within the annual report. Our opinion on the group and parent company 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. 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 course of 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 this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and 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 in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the
preparation of the group and parent company 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 group and parent company financial statements, the directors are responsible for
assessing the group and the parent company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the group or the parent company or to cease operations, or have
no realistic alternative but to do so.
43
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
• We obtained an understanding of the group and parent company and the sector in which they
operate to identify laws and regulations that could reasonably be expected to have a direct
effect on the financial statements. We obtained our understanding in this regard through
discussions with management about the potential instances of non-compliance with laws and
regulations both in the UK and in overseas subsidiaries. We also selected a specific audit team
based on experience with auditing entities within this industry of a similar size.
• We determined the principal laws and regulations relevant to the group and parent company in
this regard to be those arising from:
o Companies Act 2006
o AIM Rules
o Local industry regulations in Georgia
o Local tax and employment law
• We designed our audit procedures to ensure the audit team considered whether there were
any indications of non-compliance by the group and parent company with those laws and
regulations. These procedures included, but were not limited to:
o Making enquiries of management
o A review of Board minutes
o A review of legal ledger accounts
o A review of RNS announcements
• We also identified the risks of material misstatement of the financial statements due to fraud.
We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from
management override of controls, that there is potential for fraud in relation to revenue
recognition, we addressed this by reviewing the appropriateness of revenue recognition policies
in line with IFRS 15. There were no other significant fraud risks.
• As in all of our audits, we addressed the risk of fraud arising from management override of
controls by performing audit procedures which included, but were not limited to: the testing of
journals; reviewing accounting estimates for evidence of bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the normal course of
business; and reviewing transactions through the bank statements to identify potentially large
or unusual transactions that do not appear to be in line with our understanding of business
operations.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities,
including those leading to a material misstatement in the financial statements or non-compliance with
44
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
regulation. This risk increases the more that compliance with a law or regulation is removed from the
events and transactions reflected in the financial statements, as we will be less likely to become aware
of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud
rather than error, as fraud involves intentional concealment, forgery, collusion, omission or
misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Daniel Hutson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
10th May 2023
15 Westferry Circus
Canary Wharf
London E14 4HD
45
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Financial Statements
Consolidated Statement of Comprehensive Income for the Year Ended 31st December 2022
Note
Year ended 31st
December 2022
Year ended 31st
December 2021
Continuing operations
Revenue
4
Other cost of sales
Depreciation and depletion of oil and gas assets
5
$'000
8,262
(3,992)
(1,956)
(5,948)
2,314
(3,040)
(1,072)
(4,112)
(24)
$'000
6,114
(2,982)
(2,901)
(5,883)
231
(3,432)
(1,494)
(4,926)
(6)
22
6,7
(1,822)
(4,701)
8
9
281
(67)
5
(87)
Total cost of sales
Gross profit
Other administrative costs
Share based payments charge
Total administrative expenses
Foreign exchange movement
Operating loss
Other income
Finance expense
Loss for the year before taxation
(1,608)
(4,783)
Taxation
10
-
-
Loss for the year from continuing operations
(attributable to the equity holders of the
parent)
Items that may be reclassified subsequently to
profit and loss:
Exchange differences on translation of foreign
operations
Total comprehensive loss for the year
(attributable to the equity holders of the
parent)
(1,608)
(4,783)
448
202
(1,160)
(4,581)
Loss per share basic and diluted
11
(0.24)c
(0.76)c
All activities relate to continuing operations.
The notes on pages 50 to 74 form part of these consolidated financial statements.
46
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Consolidated Statement of Financial Position as at 31st December 2022
31st December 2022
31st December 2021
Note
$'000
$'000
Non-current assets
Property, plant and equipment
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Capital and reserves attributable to
equity holders of the Parent Company:
Share capital
Share premium
Other reserves
Foreign exchange reserve
Accumulated deficit
Total equity
Liabilities
Trade and other payables
Provisions
Total current liabilities
12
13
14
15
18
19
20
16
17
24,815
24,345
4,791
560
450
5,801
4,585
752
1,244
6,581
30,616
30,926
3,565
34,765
4,525
694
(16,349)
3,482
34,625
10,260
246
(21,548)
27,200
27,065
1,693
1,723
3,416
1,556
2,305
3,861
Total equity and liabilities
30,616
30,926
The financial statements were approved by the Board of Directors and authorised for issue on 10th May
2023 and were signed on its behalf by:
Paul Haywood
Director
The notes on pages 50 to 74 form part of these consolidated financial statement
47
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Consolidated Statement of Changes in Equity as at 31st December 2022
Share
Capital
$’000
Share
Premium
$’000
Accumulated
Deficit
$’000
Other
Reserves
$’000
Foreign
Exchange
Reserve
$’000
Total
Equity
$’000
Balance at 31st
December 2020
Loss for the year
Exchange differences
on translation of foreign
operations
Total comprehensive
loss for the year
Issue of shares
Share based payments
Options exercised
Options expired
Total transactions with
owners
Balance at 31st
December 2021
Loss for the year
Exchange differences
on translation of foreign
operations
Total comprehensive
loss for the year
Issue of shares
Share based payments
Options exercised
Options expired
Options relinquished
Total transactions with
owners
Balance at 31st
December 2022
3,353
34,234
(17,057)
9,120
-
-
-
52
-
77
-
129
-
-
-
255
-
136
-
391
(4,783)
-
(4,783)
-
-
210
82
-
-
-
-
1,494
(272)
(82)
44
-
202
202
-
-
-
-
29,694
(4,783)
202
(4,581)
307
1,494
151
-
292
1,140
-
1,952
3,482
34,625
(21,548)
10,260
246
27,065
-
-
-
27
-
56
-
-
83
-
-
-
140
-
-
-
-
140
(1,608)
-
(1,608)
-
-
-
418
6,389
-
-
-
-
1,072
-
(418)
(6,389)
-
(1,608)
448
448
-
-
-
-
-
448
(1,160)
167
1,072
56
-
-
6,807
(5,735)
-
1,295
3,565
34,765
(16,349)
4,525
694
27,200
The notes on pages 50 to 74 form part of these consolidated financial statements.
48
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Consolidated Statement of Cashflows for the Year Ended 31st December 2022
Cash flow from operating activities
Loss for the year before tax
Adjustments for:
Depreciation and depletion
Decommissioning finance charge
Disposal of PP&E at nil value
Other income
Finance expense
Creditors paid in shares
Share based payments expense
Foreign exchange movement
Operating cash flows before movements in working
capital
Decrease/ (increase) in trade and other receivables
Increase in trade and other payables
(Increase) in inventory
Net cash used in operating activities
Cash flow from investing activities
Cash received from acquisition of BRL
Income received
Expenditure in respect of PP&E
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issue of equity
Interest paid
Net cash (outflow) /inflow from financing activities
Net (decrease) in cash and cash equivalents in the year
Cash and cash equivalents at start of year
Effects of foreign exchange rate changes on cash and cash
equivalents
Cash and cash equivalents at end of year
Year ended
31st December
2022
$'000
Year ended
31st December
2021
$'000
Note
(1,608)
(4,783)
5
17
8
7
1,956
66
-
(281)
1
167
1,072
(29)
1,344
192
194
(206)
1,524
-
281
(2,730)
(2,449)
-
(1)
(1)
(926)
1,244
132
450
2,901
66
49
(5)
3
-
1,494
6
(269)
(4)
179
(471)
(565)
278
5
(6,407)
(6,124)
1,465
(3)
1,462
(5,227)
6,331
140
1,244
The notes on pages 50 to 74 form part of these consolidated financial statements.
Significant non-cash transactions
The only significant non-cash transactions were the issue of shares and share options detailed in notes
18 and 22.
49
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Notes Forming Part of the Consolidated Financial Statements
Corporate Information
Block Energy plc (“Block Energy”) gained admission to AIM on 11th June 2018, trading under the
symbol of BLOE.
The Consolidated financial statements of the Group, which comprises Block Energy Plc and its
subsidiaries, for the year ended 31st December 2022 were authorised for issue in accordance with
a resolution of the Directors on 10th May 2023. Block Energy is a Company incorporated in the UK
whose shares are publicly traded. The address of the registered office is given in the officers and
advisers section of this report. The Company's administrative office is in London, UK.
The nature of the Company's operations and its principal activities are set out in the Strategic
Report on pages 4 to 22 and the Report of the Directors on pages 23 to 25.
1. Significant Accounting policies
IAS 8 requires that management shall use its judgement in developing and applying accounting
policies that result in information which is relevant to the economic decision-making needs of users,
that are reliable, free from bias, prudent, complete and represent faithfully the financial position,
financial performance and cash flows of the entity.
Basis of preparation
The principal accounting policies adopted in the preparation of these consolidated financial
statements are set out below. The policies have been consistently applied to all the years
presented, unless otherwise stated. All amounts presented are in thousands of US dollars unless
otherwise stated. Foreign operations are included in accordance with the policies set out below.
The consolidated financial statements have been prepared in accordance with UK-adopted
international accounting standards and as regards the Company financial statements, as applied
in accordance with the requirements of the Companies Act 2006. The Financial Statements have
also been prepared under the historical cost convention, as modified by the revaluation of financial
assets at fair value through profit or loss.
The preparation of financial statements in accordance with UK-adopted international accounting
standards requires management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and factors that are
believed to be reasonable under the circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in
accounting estimates may be necessary if there are changes in the circumstances on which the
estimate was based, or as a result of new information or more experience. Such changes are
recognised in the period in which the estimate is revised.
New and amended standards adopted by the Group
There were no new or amended accounting standards that required the Group to change its
accounting policies for the year ended 31st December 2022 and no new standards, amendments
or interpretations were adopted by the Group.
New accounting standards issued but not yet effective
The standards and interpretations that are relevant to the Group, issued, but not yet effective, up
to the date of the Financial Statements are listed below. The Group intends to adopt these
standards, if applicable, when they become effective.
50
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Standard
IFRS 10 and IAS 28
(Amendments)
Amendments to IAS 1
Amendments to IAS 1
Amendments to IAS 8
Amendments to IFRS 12
Impact on initial application
Long term interests in associates and joint
ventures
Classification of liabilities as current or non-
current
Disclosure of material rather than significant
accounting policies.
Clarification on how companies should
distinguish between changes in accounting
policies and accounting estimates
Deferred tax assets and liabilities arising from a
single transaction
Effective date
Unknown
1st January 2023
1st January 2023
1st January 2023
1st January 2023
The Directors have evaluated the impact of transition to the above standards and do not consider
that there will be a material impact of transition on the financial statements.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company
controls an investee if all three of the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of the investor to use its power to
affect those variable returns. Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control. De-facto control exists in situations
where the Company has the practical ability to direct the relevant activities of the investee without
holding the majority of the voting rights. In determining whether de-facto control exists the
Company considers all relevant facts and circumstances, including:
• The size of the Company’s voting rights relative to both the size and dispersion of other
parties who hold voting rights;
• Substantive potential voting rights held by the Company and by other parties;
• Other contractual arrangements; and
• Historic patterns in voting attendance.
Business combinations and goodwill
The consolidated financial statements incorporate the results of business combinations using the
purchase method. In the consolidated statement of financial position, the acquiree’s identifiable
assets, liabilities and contingent liabilities are initially recognised at their fair values at the
acquisition date. The difference between the consideration paid and the acquired net assets is
recognised as goodwill. The results of acquired operations are included in the consolidated income
statement from the date on which control is obtained. Any difference arising between the fair value
and the tax base of the acquiree’s assets and liabilities that give rise to a deductible difference
results in recognition of deferred tax liability. No deferred tax liability is recognised on goodwill.
Acquisitions
The Group and Company measure consideration at the acquisition date as:
• The fair value of the consideration transferred; plus
• The recognised amount of any non-controlling interests in the acquiree
• Plus, if the business combination is achieved in stages, the fair value of the existing equity
interest in the acquiree; less the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Cost related to the acquisition, other than those associated with the issue of debt or equity
securities, that the Group incurs in connection with a business combination, are expensed as
incurred.
51
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Asset acquisition
Acquisitions of mineral exploration licences through the acquisition of non-operational corporate
structures that do not represent a business, and therefore do not meet the definition of a business
combination, are accounted for as the acquisition of an asset. An example of such would be
increases in working interests in licences.
The consideration for the asset is allocated to the assets based on their relative fair values at the
date of acquisition.
Going concern
The Directors have prepared cash flow forecasts for a period of 24 months from the date of signing
these financial statements. The Group’s forecasts are reviewed regularly to assess whether any
actions to curtail expenditure or cut costs are required.
The Group’s operations presently generate sufficient revenues to cover operating costs and capital
expenditures, supporting
the Group’s accounts on
a going concern basis.
the continued preparation of
The Directors are nevertheless conscious that oil prices have been volatile during the past few
years, and could rise further but could also fall back in the year ahead, and that future production
levels depend on both depletion rates from existing wells and the success of future drilling. As part
of their going concern assessment, the Directors have examined multiple scenarios in which oil
prices and/or future production levels fall substantially and have concluded that it remains possible
that future revenues in at least some scenarios might not cover all operating costs and planned
capital expenditures, creating a material uncertainty that may cast doubt over the Group’s ability
to continue as a going concern. Whilst acknowledging this material uncertainty, the Directors
remain confident of making cost savings if required and, therefore, the Directors consider it
appropriate to prepare the financial statements on a going concern basis. The financial statements
do not include the adjustments that would result if the Group were unable to continue as a going
concern.
Intangible assets
Exploration and evaluation costs
The Group applies the full cost method of accounting for Exploration and Evaluation (E&E) costs,
having regard to the requirements of IFRS 6 ‘Exploration for and Evaluation of Mineral Resources’.
Under the full cost method of accounting, costs of exploring and evaluating properties are
accumulated and capitalised by reference to appropriate cash generating units (“CGUs”). Such
CGU’s are based on geographic areas such as a licence area, type or a basin and are not larger
than an operating segment - as defined by IFRS 8 ‘Operating segments.
E&E costs are initially capitalised within ‘Intangible assets’. Such E&E costs may include costs of
licence acquisition, technical services and studies, seismic acquisition, exploration drilling and
testing, but do not include costs incurred prior to having obtained the legal rights to explore an
area, which are expensed directly to the statement of comprehensive income as they are incurred.
Plant and equipment assets acquired for use in exploration and evaluation activities are classified
as property, plant and equipment.
However, to the extent that such an asset is consumed in developing an unproven oil and gas
asset, the amount reflecting that consumption is recorded as part of the cost of the unproven oil
and gas asset.
Exploration and unproven oil and gas assets related to each exploration license/prospect are not
amortised but are carried forward until the technical feasibility and commercial feasibility of
extracting a mineral resource are demonstrated.
Impairment of Exploration and Evaluation assets
52
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
All capitalised exploration and evaluation assets and property, plant and equipment are monitored
for indications of impairment. Where a potential impairment is indicated, assessment is made for
the Group of assets representing a cash generating unit.
In accordance with IFRS 6 the Group firstly considers the following facts and circumstances in their
assessment of whether the Group’s exploration and evaluation assets may be impaired, whether:
•
the period for which the Group has the right to explore in a specific area has expired during
the period or will expire in the near future, and is not expected to be renewed;
• unexpected geological occurrences render the resource uneconomic;
• a significant fall in realised prices or oil and gas price benchmarks render the project
uneconomic; or
• an increase in operating costs occurs.
If any such facts or circumstances are noted, the Group perform an impairment test in accordance
with the provisions of IAS 36.
The aggregate carrying value is compared against the expected recoverable amount of the cash
generating unit. The recoverable amount is the higher of value in use and the fair value less costs
to sell. An impairment loss is reversed if the asset’s or cash-generating unit’s recoverable amount
exceeds its carrying amount. A reversal of impairment loss is recognised in the profit or loss
immediately.
Property, plant and equipment – development and production (D&P) assets
Capitalisation
The costs associated with determining the existence of commercial reserves are capitalised in
accordance with the preceding policy and transferred to property, plant and equipment as
development assets following impairment testing. All costs incurred after the technical feasibility
and commercial viability of producing hydrocarbons have been demonstrated are capitalised within
development assets on a field-by-field basis. Subsequent expenditure is only capitalised where it
either enhances the economic benefits of the development asset or replaces part of the existing
development asset (where the remaining cost of the original part is expensed through the income
statement). Costs of borrowing related to the ongoing construction of development and production
assets and facilities are capitalised during the construction phase. Capitalisation of interest ceases
once an asset is ready for production.
Depreciation
Capitalised oil assets are not subject to depreciation until commercial production starts.
Depreciation is calculated on a unit-of-production basis in order to write off the cost of an asset as
the reserves that it represents are produced and sold. Any periodic reassessment of reserves will
affect the depreciation rate on a prospective basis. The unit-of-production depreciation rate is
calculated on a field-by-field basis using proved, developed reserves as the denominator and
capitalised costs as the numerator. The numerator includes an estimate of the costs expected to
be incurred to bring proved, developed, not-producing reserves into production. Infrastructure that
is common to a number of fields, such as gathering systems, treatment plants and pipelines are
depreciated on a unit-of-production basis using an aggregate measure of reserves or on a straight
line basis depending on the expected pattern of use of the underlying asset.
Proven oil and gas properties
Oil and gas properties are stated at cost less accumulated depreciation and impairment losses.
The initial cost comprises the purchase price or construction cost including any directly attributable
cost of bringing the asset into operation and any estimated decommissioning provision.
Once a project reaches the stage of commercial production and production permits are received,
the carrying values of the relevant exploration and evaluation asset are assessed for impairment
and transferred to proven oil and gas properties and included within property plant and equipment.
53
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Proven oil and gas properties are accounted for in accordance with provisions of the cost model
under IAS 16 “Property Plant and Equipment” and are depleted on unit of production basis based
on the estimated proven and probable reserves of the pool to which they relate.
Impairment of development and production assets
A review is performed for any indication that the value of the Group’s D&P assets may be impaired
such as:
• significant changes with an adverse effect in the market or economic conditions which will
impact the assets; or
• obsolescence or physical damage of an asset; or
• an asset becoming idle or plans to dispose of the asset before the previously expected date;
or
• evidence is available from internal reporting that indicates that the economic performance
of an asset is or will be worse than expected.
For D&P assets when there are such indications, an impairment test is carried out on the CGU.
CGUs are identified in accordance with IAS 36 ‘Impairment of Assets’, where cash flows are largely
independent of other significant asset Groups and are normally, but not always, single development
or production areas. When an impairment is identified, the depletion is charged through the
Consolidated Statement of Comprehensive Income if the net book value of capitalised costs
relating to the CGU exceeds the associated estimated future discounted cash flows of the related
commercial oil reserves.
The CGU’s identified by the company are Corporate along with West Rustavi, Rustaveli,
Satskhenisi and Norio given they are independent projects under individual Production Sharing
Contracts (“PSCs”). An assessment is made at each reporting as to whether there is any indication
that previously recognised impairment charges may no longer exist or may have decreased. If
such an indication exists, the Group estimates the recoverable amount. A previously recognised
impairment charge is reversed only if there has been a change in the estimates used to determine
the assets recoverable amount since the last impairment charge was recognised. If this is the case
the carrying amount of the asset is increased to its recoverable amount, not to exceed the carrying
amount that would have been determined, net of depreciation, had no impairment charges been
recognised for the asset in prior years.
Property, plant and equipment and depreciation
Property, plant and equipment which are awaiting use in the drilling campaigns, and storage, are
recorded at historical cost less accumulated depreciation. Property, plant and equipment are
depreciated using the straight-line method over their estimated useful lives, as follows:
• PP&E - 6 years
The carrying value of Property, plant and equipment is assessed annually and any impairment
charge is charged to the Consolidated Statement of Comprehensive income.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The
Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets (such as tablets and personal computers,
small items of office furniture and telephones). For these leases, the Group recognises the lease
payments as an operating expense on a straight-line basis over the term of the lease unless
another systematic basis is more representative of the time pattern in which economic benefits
from the leased assets are consumed.
Inventories
54
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Crude oil inventories are stated at the lower of cost and net realisable value. The cost of crude oil
is the cost of production, including direct labour and materials, depreciation and an appropriate
portion of fixed overheads allocated based on normal operating capacity of the production facilities,
determined on a weighted average cost basis. Net realisable value of crude oil is based on the
market price of similar crude oil at the balance sheet date and costs to sell, adjusted if the sale of
inventories after that date gives additional evidence about its net realisable value at the balance
sheet date.
The cost of crude oil is expensed in the period in which the related revenue is recognised.
Inventories of drilling tubulars and drilling chemicals are valued at the lower of cost or net realisable
value, where cost represents the weighted average unit cost for inventory lines on a line by line
basis. Cost comprises all costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition.
Decommissioning provision
Provisions for decommissioning are recognised in full when wells have been suspended or facilities
have been installed.
A corresponding amount equivalent to the provision is also recognised as part of the cost of either
the related oil and gas exploration and evaluation asset or property, plant and equipment as
appropriate. The amount recognised is the estimated cost of decommissioning, discounted to its
net present value, and is reassessed each year in accordance with local conditions and
requirements.
Changes in the estimated timing of decommissioning or decommissioning cost estimates are dealt
with prospectively by recording an adjustment to the provision, and a corresponding adjustment to
the related asset.
The unwinding of the discount on the decommissioning provision is included as a finance cost.
Taxation and deferred tax
Income tax expense represents the sum of the current tax and deferred tax charge for the period.
The Group's liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in
the financial information and the corresponding tax bases and is accounted for using the balance
sheet liability method.
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
Judgement is applied in making assumptions about future taxable income, including oil and gas
prices, production, rehabilitation costs and expenditure to determine the extent to which the Group
recognises deferred tax assets, as well as the anticipated timing of the utilisation of the losses.
Deferred tax is calculated at the tax rates that have been enacted or substantively enacted and
are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax
is charged or credited to the statement of comprehensive income, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated into US dollars at
the rates of exchange prevailing at the reporting date: $1.21/£1 (2021: $1.35/£1). Transactions in
foreign currencies are translated at the exchange rate ruling at the date of the transaction.
Exchange differences are taken to the Statement of Comprehensive Income.
55
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
The Company’s functional currency is the pound sterling and its presentational currency is the US
dollar and accordingly the financial statements have also been prepared in US dollars. The
functional currencies of Block Norioskhevi Ltd, Satskhenisi Limited, Georgia New Ventures Inc and
Block Rustaveli Limited are the US dollar and the functional currencies of their branches in Georgia
are the Georgian Lari.
Foreign operations
The assets are translated into US dollars at the exchange rate at the reporting date and income
and expenses of the foreign operations are translated at the average exchange rates. Exchange
differences arising on translation are recognised in other comprehensive income and presented in
the other reserves category in equity.
Determination of functional currency and presentational currency
The determination of an entity’s functional currency is assessed on an entity by entity basis. A
company’s functional currency is defined as the currency of the primary economic environment in
which the entity operates. The functional currency of the Parent Company is the pound sterling,
because it operates in the UK, where the majority of its transactions are in pounds sterling. The
functional currencies of Block Norioskhevi Ltd, Satskhenisi Limited, Georgia New Ventures Inc and
Block Rustaveli Limited are the US dollar, because the majority of their transactions by value is in
US dollars, and the functional currencies of their branches in Georgia are the Georgian Lari,
because the majority of their transactions by value is in Georgian Lari.
The presentational currency of the Group for year ended 31st December 2022 is US dollars. The
presentational currency is an accounting policy choice.
Revenue
Revenue from contracts with customers is recognised when the Group satisfies its performance
obligation of transferring control of oil or gas to a customer. Transfer of control is usually concurrent
with both transfer of title and the customer taking physical possession of the oil or gas, which is
determined by reference to the oil or gas sales agreement. This performance obligation is satisfied
at that point in time.
The transaction price is agreed between the Group and the customer, with the amount of revenue
recognised being determined by considering the terms of the Production Sharing Contract (“PSC”)
and the oil sales agreement for each oil sale or the gas sales agreement for each gas sale.
Finance income and expenses
Finance costs are accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable. Finance expenses comprise interest or finance costs on
borrowings.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the
Group becomes party to the contractual provisions of the instrument.
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. All assets and liabilities,
for which fair value is measured or disclosed in the Financial Statements, are categorised within
the fair value hierarchy, described as follows, based on the lowest-level input that is significant to
the fair value measurement as a whole:
Level 1 – quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 – valuation techniques for which the lowest-level input that is significant to the fair value
measurement is directly or indirectly observable; and
56
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Level 3 – valuation techniques for which the lowest-level input that is significant to the fair value
measurement is unobservable.
Financial assets
Financial assets are initially recognised at fair value, and subsequently measured at amortised
cost, less any allowances for losses using the expected credit loss model, being the difference
between all contractual cash flows that are due to the Group in accordance with the contract and
all the cash flows that the Group expects to receive.
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 where the credit risk has not increased significantly since initial recognition of the
financial asset, twelve month expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased significantly, lifetime expected credit
losses along with the gross interest income are recognised. For those that are determined to be
credit impaired, lifetime expected credit losses along with interest income on a net basis are
recognised.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit and loss
(“FVTPL”) or as other financial liabilities. The Group derecognises financial liabilities when, and
only when, the Group’s obligations are discharged or cancelled, or they expire.
Financial liabilities are classified at FVTPL when the financial liability is either held for trading or it
is designated at FVTPL. A financial liability is classified as held for trading if it has been incurred
principally for the purpose of repurchasing it in the near term or is a derivative that is not a
designated or effective hedging instrument.
Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on
changes in fair value recognised in profit or loss. The net gain or loss recognised in profit or loss
incorporates any interest paid on the financial liability.
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction
costs and are subsequently measured at amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments through the expected life of the financial
liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Share based payments
The fair value of options granted to Directors and others in respect of services provided is
recognised as an expense in the Statement of Comprehensive Income with a corresponding
increase in equity reserves – ‘other reserves’.
On exercise of, or expiry of unexercised share options, the proportion of the share based payment
reserve relevant to those options is transferred from other reserves to the accumulated deficit. On
exercise, equity is also increased by the amount of the proceeds received.
The fair value is measured at grant date and charged over the accounting periods which the option
becomes unconditional.
The fair value of options are calculated using the Black-Scholes model, taking into account the
terms and conditions upon which the options were granted. Vesting conditions are non-market and
there are no market vesting conditions. These vesting conditions are included in the assumptions
about the number of options that are expected to vest. At the end of each reporting period, the
57
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Company revises its estimate of the number of options that are expected to vest. The exercise
price is fixed at the date of grant and no compensation is due at the date of grant. Where equity
instruments are granted to persons other than employees, the statement of comprehensive income
is charged with the fair value of the goods and services received.
Warrants issued for services rendered are accounted for in accordance with IFRS 2 recognising
either the costs of the service if it can be reliably measured or the fair value of the warrant (using
the Black-Scholes model). The fair value is recognised as an expense in the accounting period
that the warrant is granted and there is no revision to this estimate in future accounting periods.
Warrants issued as part of share issues have been determined as equity instruments under IAS
32. Since the fair value of the shares issued at the same time is equal to the price paid, these
warrants, by deduction, are considered to have been issued at nil value.
2. Critical accounting judgments, estimates and assumptions
The Group makes estimates and assumptions regarding the future. Estimates and judgements are
continuously evaluated based on historical experiences and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. In the future, actual
experience may deviate from these estimates and assumptions. The key assumptions concerning
the future and other key sources of estimation uncertainty at the reporting date that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are described below.
Recoverable value of Development & Production assets –judgement, estimates and assumptions
Costs capitalised in respect of the Group’s development and production assets are required to be
assessed for impairment under the provisions of IAS 36. Such an estimate requires the Group to
exercise judgement in respect of the indicators of impairment and also in respect of inputs used in
the models which are used to support the carrying value of the assets. Such inputs include
estimates of oil and gas reserves, production profiles, oil price, oil quality discount, capital
expenditure (including an allocation of salary costs), inflation rates, and pre-tax discount rates that
reflect current market assessments of (a) the time value of money; and (b) the risks specific to the
asset for which the future cash flow estimates have not been adjusted. The Directors concluded
that there was no indication of impairment in the current year.
Asset decommissioning provisions –estimates and assumptions
The Group’s activities are subject to various laws and regulations governing the protection of the
environment. The Group recognises management’s best estimate of the asset decommissioning
costs in the period in which they are incurred. Such estimates of costs include pre-tax discount
rates that reflect current market assessments of (a) the time value of money; and (b) the risks
specific to the asset for which the future cash flow estimates have not been adjusted. Actual costs
incurred in future periods could differ materially from the estimates.
Additionally, future changes to environmental laws and regulations, life of development and
production assets, estimates and discount rates could affect the carrying amount of this provision.
The Board assessed the extent of decommissioning required as at 31st December 2022 and
concluded that a provision of $1,723,000 (2021: $2,040,000) should be recognised in respect of
future decommissioning obligations at Rustaveli, West Rustavi, Satskhenisi and Norio (see note
17).
Share options – estimates and assumptions
Share options issued by the Group relates to the Block Energy plc Share Option Plan. The grant
date fair value of such options is calculated using a Black-Scholes model whose input assumptions
are derived from market and other internal estimates.
The key estimates include volatility rates and the expected life of the options, together with the
likelihood of non-market performance conditions being achieved (see note 22).
Impairment of investments and loans to subsidiaries – Parent Company only
58
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
The Company assesses at each reporting date whether there is any objective evidence that
investments/receivables in subsidiaries are impaired. To determine whether there is objective
evidence of impairment, a considerable amount of estimation is required in assessing the ultimate
realisation of these investments/receivables, including valuation, creditworthiness and future
cashflow. No impairment of investments was indicated at year end.
In prior years the Company carried out an assessment of the expected credit loss arising on
intercompany receivables. This was calculated as a total loss allowance of $3,710,000 and was
provided for in the parent Company financial statements. The Company has judged that as there
has been no impairment of the underlying assets then no further loss allowance is required in the
current year.
3. Segmental disclosures
IFRS 8 requires segmental information for the Group on the basis of information reported to the
chief operating decision maker for decision making purposes. The Company considers this role as
being performed by the Board of Directors. The Group’s operations are focused on oil and gas
development and production activities (Oil Extraction segment) in Georgia and has a corporate
head office in the UK (Corporate segment). Based on risks and returns the Directors consider that
there are two operating segments that they use to assess the Group’s performance and allocate
resources being the Oil Extraction in Georgia, and the corporate segment including unallocated
costs.
The segmental results are as follows:
Year ended 31st December 2022
Oil
Extraction
$'000
Corporate
and other
$'000
Revenue
Cost of sales
Depreciation and depletion
Administrative costs
Other income
Net Finance costs and Forex
Profit/(loss) from operating activities
Total non-current assets
8,262
(3,992)
(1,906)
(1,012)
18
(82)
1,288
24,814
Group
Total
$'000
8,262
(3,992)
(1,956)
(4,112)
281
(91)
(1,608)
Group
Total
$'000
6,114
(2,982)
(2,901)
(4,926)
5
(93)
(4,783)
-
-
(50)
(3,100)
263
(9)
(2,896)
-
-
(5)
(3,725)
-
(3)
(3,733)
1
24,815
Oil
Extraction
$'000
Corporate
and other
$'000
4
24,345
31st December
2022
$'000
31st December
2021
$'000
30,206
410
30,616
23,745
7,181
30,926
6,114
(2,982)
(2,896)
(1,201)
5
(90)
(1,050)
24,341
59
Year ended 31st December 2021
Revenue
Cost of sales
Depreciation and depletion
Administrative costs
Other income
Net Finance costs and income
Loss from operating activities
Total non-current assets
Segmental Assets
Oil exploration – Georgia
Corporate and other
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Segmental Liabilities
Oil exploration – Georgia
Corporate and other
4. Revenue
Crude oil revenue
Gas revenue
5. Depreciation and Depletion on Oil and Gas assets
Depreciation of PP&E
Depletion of oil and gas assets
6. Expenses by nature
Employee benefit expense
Share option charge
Warrants charge
Security expense
Fees to Auditor in respect of the Group audit
Fees to Auditor for other non-audit services
Regulatory fees
Operating lease expense
7. Directors and employees
Employment costs (inc. Directors’ remuneration):
Wages and salaries
Pensions
60
31st December
2022
$'000
31st December
2021
$'000
2,591
825
3,416
3,087
774
3,861
Year ended
31st December
2022
Year ended
31st December
2021
$'000
7,492
770
8,262
$'000
5,519
595
6,114
Year ended
31st December
2022
Year ended
31st December
2021
$'000
273
1,683
1,956
$'000
238
2,663
2,901
Year ended
31st December
2022
Year ended
31st December
2021
$’000
1,705
1,072
-
15
96
-
31
81
$’000
1,720
1,224
270
162
93
7
51
49
Year ended
31st December
2022
Year ended
31st December
2021
$’000
1,563
49
$’000
1,453
55
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Social security costs
Share based payments
93
1,705
1,035
2,740
212
1,720
1,449
3,169
The share based payments comprised the fair value of options granted to Directors and employees
in respect of services provided.
Wages and salaries include amounts that are recharged between subsidiaries. Some of these
costs are then capitalised as development and production assets and others are administration
expenses.
The average monthly number of employees during 2022 was 168 (2021: 176) split as follows:
Management
Technical
Administration
Amounts attributable to the highest paid Director:
Director’s salary and bonus
Pension
Share based payments
Year ended
31st December
2022
Year ended
31st December
2021
9
129
30
168
18
135
23
176
Year ended
31st December
2022
Year ended
31st December
2021
$’000
$’000
426
25
104
555
358
27
183
568
Key management and personnel are considered to be the Directors.
8. Other income
Sale of materials
Insurance claim
Year ended
31st December
2022
Year ended
31st December
2021
$’000
-
281
281
$’000
5
-
5
In the prior year, materials to be used in the construction of the gas pipeline from the Early
Production Facility at West Rustavi were sold for $5,000.
61
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
9. Finance expense
Finance expense
10. Taxation
Year ended
31st December
2022
Year ended
31st December
2021
$’000
67
67
$’000
87
87
Based on the results for the year, there is no charge to UK or foreign tax. This is reconciled to the
accounting loss as follows:
UK taxation
Year ended
31st December
2022
Year ended
31st December
2021
$'000
$'000
UK Group loss on ordinary activities
(1,608)
(4,783)
Loss before taxation at the average UK standard rate
of 19% (2021:19%)
Effect of:
Zero tax rate income
Disallowable expenses
Tax losses for which no deferred income tax asset was
recognised
Current tax
(306)
(909)
(1,570)
302
2,876
(1,162)
457
5,488
-
-
The Group offsets deferred tax assets and liabilities if, and only if, it has a legally enforceable right
to offset current tax assets and current tax liabilities and the deferred tax assets and deferred tax
liabilities related to corporation taxes levied by the same tax authority. Due to the tax rates
applicable in the jurisdictions of the Group’s subsidiary entities (being 0%) no deferred tax liabilities
or assets are considered to arise.
For any other jurisdictions which the Group has not recognised deferred income tax assets for tax
losses carried forward for entities in which it is not considered probable that there will be sufficient
future taxable profits available for offset. Unrecognised deferred income tax assets related to
unused tax losses. The Company has UK corporation tax losses available to carry forward against
future profits of approximately $14,414,000 (2021: $13,109,000 - estimated).
11. Loss per share
The calculation for loss per Ordinary Share (basic and diluted) is based on the consolidated loss
attributable to the equity shareholders of the Company is as follows:
Year ended
31st December
2022
Year ended
31st December
2021
62
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Loss attributable to equity Shareholders ($’000)
(1,608)
(4,783)
Weighted average number of Ordinary Shares
660,223,772
630,629,894
Loss per Ordinary share ($/cents)
(0.24)c
(0.76)c
Loss and diluted loss per Ordinary Share are calculated using the weighted average number of
Ordinary Shares in issue during the year. Diluted share loss per share has not been calculated as
the options and warrants have no dilutive effect given the loss arising in the year.
12. Property, Plant and Equipment
Development &
Production
Assets
$'000
PPE/Computer /
Office
Equipment /
Motor Vehicles
$'000
Cost
At 1st January 2021
Reallocation of assets
Additions
Disposals
Reduction in BLO (see note 17)
Foreign exchange movements
At 31st December 2021
Additions
Disposals
Reduction in BLO (see note 17)
Foreign exchange movements
At 31st December 2022
Accumulated depreciation
At 1st January 2021
Reallocation of assets
Disposals
Charge for the year
Foreign exchange movements
At 31st December 2021
Disposals
Charge for the year
Foreign exchange movements
At 31st December 2022
Carrying Amount
At 1st January 2022
At 31st December 2022
22,096
(780)
6,182
(38)
(498)
-
26,962
2,397
-
(265)
21
29,115
1,457
(91)
-
2,663
-
4,029
-
1,683
(1)
5,711
22,933
23,404
Total
$'000
22,873
-
6,472
(50)
(498)
(33)
28,764
2,730
(89)
(265)
42
31,187
1,562
-
(1)
2,901
(43)
4,419
(2)
1,956
(1)
6,372
777
780
290
(12)
-
(33)
1,802
333
(89)
-
26
2,072
105
91
(1)
238
(43)
390
(2)
273
-
661
1,412
1,411
24,345
24,815
Carrying amount of property plant and equipment by cash generative unit:
Carrying amount
At 31st
December 2022
Norio
$'000
Satsk
henisi
$'000
West
Rustavi
$'000
Rustaveli Corporate
$'000
$’000
Total
$'000
2,126
174
14,625
7,488
402
24,815
63
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
At 31st December
2021
2,222
176
14,045
7,721
181
24,345
At the end of the current year, the Directors concluded there were no impairment indicators in the
current year that warranted impairment testing to be prepared with respect to the carrying value of
the assets of the Group.
13. Inventory
Spare parts and consumables
Crude oil
14. Trade and other receivables
Other receivables
Prepayments
31st December
2022
$’000
3,606
1,185
4,791
31st December
2022
$’000
347
213
560
31st
December
2021
$’000
3,174
1,411
4,585
31st
December
2021
$’000
657
95
752
The fair value at amortised cost is considered to be equivalent to the book value as none of these
receivables are considered to be impaired.
15. Cash and cash equivalents
Cash and cash equivalents
31st December
2022
31st December
2021
$’000
450
$’000
1,244
Cash and cash equivalents consist of balances in bank accounts used for normal operational
activities. The vast majority of the cash was held in an institution with a Standard & Poor's credit
rating of A-1.
16. Trade and other payables
Trade and other payables
Accruals
31st December
2022
31st December
2021
$’000
1,182
511
1,693
$’000
845
711
1,556
Trade and other payables principally comprise amounts outstanding for corporate services and
operational expenditure.
64
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
17. Provisions
Decommissioning provision
Baseline oil liability
Decommissioning provision
Brought forward
Unwinding of discount on provision
Change in decommissioning provision in the year
Carried forward
Baseline oil liability
Brought forward
Baseline oil liability reducing from the acquisition
Additional baseline oil liability provided in the year
Carried forward
31st December
2022
31st December
2021
$’000
1,723
-
1,723
$’000
2,040
265
2,305
31st December
2022
31st December
2021
$’000
2,040
66
(383)
1,723
$’000
1,917
-
123
2,040
31st December
2022
31st December
2021
$’000
265
(265)
-
-
$’000
745
(498)
18
265
Decommissioning provisions are based on management estimates of work and the judgement of
the Directors. By its nature, the detailed scope of work required, and timing of such work is
uncertain.
The baseline oil liability arose from the acquisition of BRL in 2020. Under the production sharing
contract for Block XIB, BRL was obliged to deliver a certain quantity of oil to the State of Georgia
in quarterly instalments by May 2022. This was all delivered and there were no further liabilities at
year end.
18. Share capital
Called up, allotted, issued and fully paid
No. Ordinary
Shares
No. Deferred
Shares
Nominal Value
$
As at 1st January 2021
Issue of equity on 4th January 2021
Issue of equity on 12th January 2021
Issue of equity on 1st February 2021
Issue of equity on 15th February 2021
Issue of equity on 1st March 2021
Issue of equity on 12th March 2021
Issue of equity on 16th March 2021
Issue of equity on 7th April 2021
Issue of equity on 5th May 2021
Issue of equity on 7th June 2021
Issue of equity on 2nd July 2021
Issue of equity on 2nd September 2021
Issue of equity on 15th September 2021
Issue of equity on 4th October 2021
Issue of equity on 8th October 2021
614,542,093
617,571
397,904
839,996
180,715
232,248
865,896
6,590,707
58,972
171,715
125,696
1,355,805
62,005
24,877,230
746,668
299,412
2,095,165,355
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,352,509
2,098
1,362
2,937
632
800
2,983
22,752
204
611
434
4,713
209
83,684
2,556
1,025
65
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Issue of equity on 2nd November 2021
Issue of equity on 5th December 2021
262,403
522,489
-
-
873
1,766
As at 31st December 2021
652,749,525
2,095,165,355
3,482,148
Issue of equity on 5th January 2022
Issue of equity on 2nd February 2022
Issue of equity on 3rd February 2022
Issue of equity on 11th February 2022
Issue of equity on 1st March 2022
Issue of equity on 2nd March 2022
Issue of equity on 1st April 2022
Issue of equity on 3rd April 2022
Issue of equity on 4th May 2022
Issue of equity on 1st June 2022
Issue of equity on 6th June 2022
Issue of equity on 6th July 2022
Issue of equity on 2nd August 2022
Issue of equity on 2nd September 2022
Issue of equity on 4th October 2022
Issue of equity on 14th October 2022
Issue of equity on 1st November 2022
Issue of equity on 2nd November 2022
Issue of equity on 1st December 2022
Issue of equity on 2nd December 2022
Issue of equity on 13th December 2022
324,102
1,768,705
233,232
636,832
400,219
280,117
404,838
376,773
636,077
273,392
586,133
902,395
1,378,658
2,551,864
1,632,875
464,457
233,047
656,382
303,268
1,569,850
12,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,087
5,903
778
2,126
1,313
919
1,273
1,184
2,004
793
1,700
2,751
4,073
7,125
4,698
1,336
506
1,889
917
4,749
36,303
As at 31st December 2022
680,362,741
2,095,165,355
3,565,575
On 5th January 2022, the Company issued 324,102 Ordinary Shares to two service providers in
lieu of cash settlement for services provided to the Company with a total value of £3,033 ($4,067).
On 2nd February 2022, the Company issued 1,768,705 Ordinary Shares to three Non-Executive
Directors and a consultant, on exercise of their nil cost options.
On 3rd February 2022, the Company issued 233,232 Ordinary Shares to two service providers in
lieu of cash settlement for services provided to the Company with a total value of £3,033 ($4,049).
On 11th February 2022, the Company issued 636,832 Ordinary Shares to a consultant on exercise
of their nil cost options.
On 1st March 2022, the Company issued 400,219 Ordinary Shares to three Non-Executive
Directors on exercise of their nil cost options.
On 2nd March 2022, the Company issued 280,117 Ordinary Shares to two service providers in lieu
of cash settlement for services provided to the Company with a total value of £3,033 ($3,981).
On 1st April 2022, the Company issued 404,838 Ordinary Shares to three Non-Executive Directors
on exercise of their nil cost options.
On 3rd April 2022, the Company issued 376,773 Ordinary Shares to three service providers in lieu
of cash settlement for services provided to the Company with a total value of £4,033 ($5,071).
On 4th May 2022, the Company issued 329,458 Ordinary Shares to three Non-Executive Directors
on exercise of their nil cost options. Additionally on this date, the Company issued 306,619
Ordinary Shares to three service providers in lieu of cash settlement for services provided to the
Company with a total value of £4,033 ($5,081).
On 1st June 2022, the Company issued 273,392 Ordinary Shares to three Non-Executive Directors
on exercise of their nil cost options.
On 6th June 2022, the Company issued 586,133 Ordinary Shares to three service providers in lieu
of cash settlement for services provided to the Company with a total value of £8,183 ($9,494).
66
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
On 6th July 2022, the Company issued 243,395 Ordinary Shares to three Non-Executive Directors
on exercise of their nil cost options. Additionally on this date, the Company issued 659,000
Ordinary Shares to three service providers in lieu of cash settlement for services provided to the
Company with a total value of £10, 641 ($12,976).
On 2nd August 2022, the Company issued 309,767 Ordinary Shares to three Non-Executive
Directors on exercise of their nil cost options. Additionally on this date, the Company issued
671,722 Ordinary Shares to two service providers in lieu of cash settlement for services provided
to the Company with a total value of £11,473 ($13,557) and 397,169 Ordinary Shares to a former
consultant following the exercise of their nil cost options.
On 2nd September 2022, the Company issued 307,978 Ordinary Shares to three Non-Executive
Directors on exercise of their nil cost options. Additionally on this date, the Company issued
2,243,886 Ordinary Shares to three service providers in lieu of cash settlement for services
provided to the Company with a total value of £31,400 ($35,070).
On 4th October 2022, the Company issued 233,192 Ordinary Shares to three Non-Executive
Directors on exercise of their nil cost options. Additionally on this date, the Company issued
1,399,683 Ordinary Shares to three service providers in lieu of cash settlement for services
provided to the Company with a total value of £21,950 ($25,262).
On 14th October 2022, the Company issued 464,457 Ordinary Shares to a consultant on exercise
of their nil cost options.
On 1st November 2022, the Company issued 233,047 Ordinary Shares to three Non-Executive
Directors on exercise of their nil cost options.
On 2nd November 2022, the Company issued 656,382 Ordinary Shares to a service provider in lieu
of cash settlement for services provided to the Company with a total value of £12,198 ($14,038).
On 1st December 2022, the Company issued 303,268 Ordinary Shares to three Non-Executive
Directors on exercise of their nil cost options.
On 2nd December 2022, the Company issued 1,569,850 Ordinary Shares to three service providers
in lieu of cash settlement for services provided to the Company with a total value of £28,640
($34,657).
On 13th December 2022, the Company issued 12,000,000 Ordinary Shares to Jindal Petroleum
(Georgia) Limited on exercise of the nil cost options which were granted in 2020 as part of the
consideration for the acquisition of Schlumberger Rustaveli Company Limited.
On 4th January 2021, the Company issued 617,571 Ordinary Shares to a service provider in lieu
of cash settlement for services provided to the Company with a total value of £20,984 ($28,509).
On 12th January 2021, the Company issued 397,904 Ordinary Shares to a Chris Brown, Non-
executive Director, on exercise of his nil cost options.
On 1st February 2021, the Company issued 839,996 Ordinary Shares to six service providers in
lieu of cash settlement for services provided to the Company with a total value of £29,251
($40,914).
On 15th February 2021,
employee/Director on exercise of their nil cost options.
the Company
issued 180,715 Ordinary Shares
to a
former
On 1st March 2021, the Company issued 232,248 Ordinary Shares to four service providers in lieu
of cash settlement for services provided to the Company with a total value of £7,542 ($10,395).
On 12th March 2021, the Company issued 865,896 Ordinary Shares to Philip Dimmock, Chairman
and a Contractor, on exercise of their nil cost options.
On 16th March 2021, the Company issued 4,400,000 Ordinary Shares to Paul Haywood, Executive
Director, on exercise of his options, at an exercise price of 2.5 pence per share. Additionally on this
date, the Company issued 2,190,707 Ordinary Shares to a service provider in lieu of cash
settlement for services provided to the Company with a total value of £72,134 ($100,000).
67
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
On 7th April 2021, the Company issued 58,972 Ordinary Shares to one service provider in lieu of
cash settlement for services provided to the Company with a total value of £1,717 ($2,372).
On 5th May 2021, the Company issued 171,715 Ordinary Shares to two service providers in lieu of
cash settlement for services provided to the Company with a total value of £4,751 ($6,765).
On 7th June 2021, the Company issued 125,696 Ordinary Shares to two service providers in lieu
of cash settlement for services provided to the Company with a total value of £3,234 ($4,468).
On 2nd July 2021, the Company issued 1,355,805 Ordinary Shares to a former employee on
exercise of their nil cost options at a value of $44,269 to the Company as it met the income tax
cost of this issue.
On 2nd September 2021, the Company issued 62,005 Ordinary Shares to a service provider in lieu
of cash settlement for services provided to the Company with a total value of £155 ($209).
On 15th September 2021, the Company issued 24,877,230 Ordinary Shares at their nominal value
to the Employee Benefit Trust.
On 4th October 2021, the Company issued 746,668 Ordinary Shares to four service providers in
lieu of cash settlement for services provided to the Company with a total value of £20,148
($27,589).
On 8th October 2021, the Company issued 299,412 Ordinary Shares to a former Director, on
exercise of their nil cost options.
On 2nd November 2021, the Company issued 262,403 Ordinary Shares to two service providers in
lieu of cash settlement for services provided to the Company with a total value of £5,533 ($7,367).
On 5th December 2021, the Company issued 522,489 Ordinary Shares to two service providers in
lieu of cash settlement for services provided to the Company with a total value of £8,033 ($10,863).
The Ordinary Shares consist of full voting, dividend and capital distribution rights and they do not
confer any rights for redemption. The Deferred Shares have no entitlement to receive dividends or
to participate in any way in the income or profits of the Company, nor is there entitlement to receive
notice of, speak at, or vote at any general meeting or annual general meeting.
19. Share premium account
Balance at 1st January 2022
Premium arising on issue of equity shares
Share issue costs
Balance at 31st December 2022
Balance at 1st January 2021
Premium arising on issue of equity shares
Share issue costs
Balance at 31st December 2021
20. Reserves
$’000
34,625
140
-
34,765
$’000
34,234
391
-
34,625
The following describes the nature and purpose of each reserve within owners’ equity.
Reserves
Share capital
Description and purpose
Amount subscribed for share capital at nominal value.
Share
premium
account
Amount subscribed for share capital in excess of nominal value, less
attributable costs.
68
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Other
reserves
Foreign
exchange
reserve
The other reserves comprises the fair value of all share options and
warrants which have been charged over the vesting period, net of the
amount relating to share options which have expired, been cancelled and
have vested. It also comprises of the fair value of the share options
issued as part of the consideration paid for the acquisition of the
subsidiary BRL and subsequently relinquished in the year. This
movement has been shown in the Consolidated Statement of the
Changes in Equity and is also set out in the table below
Exchange differences on translating the net assets of foreign operations
Accumulated
deficit
Cumulative net gains and losses recognised in the income statement
and in respect of foreign exchange.
Other reserves
Balance at 1st January 2022
Share based payments
Options movement
Balance at 31st December 2022
Balance at 1st January 2021
Share based payments
Options movement
Balance at 31st December 2021
$’000
10,260
1,072
(6,807)
4,525
$’000
9,120
1,494
(354)
10,260
On 30th November 2022, the Company announced that the outstanding Consideration due to
Schlumberger Production Management (“SLB”); (the seller of XIB) had not been taken up and that
the 108,000,000 nil-cost options issued to SLB were to be relinquished. This decision has
significantly improved the Company’s accumulated deficit, with $6,389,000 of the movement in
options being attributable to this relinquishment of options and their subsequent recycling of this
amount through the reserves.
21. Warrants
Outstanding at the
beginning of the
year
Expired in the year
Outstanding at the
end of the year
Number of
Warrants
16,820,502
(6,011,308)
10,809,194
31st December
2022 weighted
average exercise
price
31st December
2021 weighted
average exercise
price
Number of
Warrants
6p
11p
16,820,502
-
4p
16,820,502
6p
-
6p
As at 31st December 2022, all warrants were available to exercise and were exercisable at prices
between 3p and 12.5p (31 December 2021: 3p and 12.5p). The weighted average life of the
warrants is 2.89 years (31 December 2021: 2.65 years). No new warrants were issued and no
existing warrants were exercised during the year. 6,011,308 warrants expired during the year. The
fair value of additions during the year was $nil (2021: $nil).
69
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
22. Share based payments
During the year, the Group operated a Block Energy plc Share Option Plan (Share Option
Scheme).
Under IFRS 2, an expense is recognised in the statement of comprehensive income for share-
based payments, to recognise their fair value at the date of grant. The application of IFRS 2 gave
rise to a charge of $1,072,000 for the year ended 31st December 2022. The equivalent charge for
the year ended 31st December 2021 was $1,494,000. The Group recognised total expenses (all of
which related to equity settled share-based payment transactions) under the current plans of:
Share option scheme
Warrants charge
Share Option Scheme
Year ended
31st December
2022
Year ended
31st December
2021
$'000
1,072
-
1,072
$'000
1,224
270
1,494
The vesting period varies between 0 days to 3 years. The options expire if they remain unexercised
after the exercise period has lapsed and have been valued using the Black Scholes model.
The following table sets out details of all outstanding options granted under the Share Option
Scheme.
Outstanding at beginning of
year
Granted during the year
Exercised during the year
Expired during the year
Outstanding at the end of
the year
Exercisable at the end of the
year
2022
Options
47,065,951
85,637,597
(15,111,350)
(17,486,046)
2022
Weighted
average
exercise price
$0.05
$0.02
$0.01
$0.06
2021
Options
31,338,713
44,136,726
(25,211,024)
(3,198,464)
100,106,152
$0.02
47,065,951
59,272,819
29,161,323
2021
Weighted
average
exercise price
$0.05
$0.02
$0.01
$0.04
$0.03
The weighted average exercise price of the share options exercisable at 31st December 2022 is
$0.02 (31st December 2021: $0.03). The weighted average contractual life of the share-based
payments outstanding at 31st December 2022 is 7.96 years (31st December 2021: 9.8 years).
The estimated fair values of these share options, and the inputs used in the Black-Scholes model
to calculate those fair values are as follows:
Date of grant
30th June 2017
6th April 2018
11th June 2018
21st October 2019
1st March 2021
8th April 2022
31st December 2020
Number
of options
1,200,000
4,400,000
18,098,332
6,325,000
10,800,00
25,200,000
Warrants
8,750,167
Estimated
fair value
$0.04
$0.05
$0.04
$0.05
$0.04
$0.01
Share
price
$0.01
$0.04
$0.05
$0.06
$0.04
$0.02
Exercise
price
$0.03
$0.03
$0.05
$0.15
$0.06
$0.02
Expected
volatility
84%
84%
84%
109%
192%
105%
Expected
life
5.5 years
10 years
10 years
9.0 years
9.5 years
10 years
Risk free
rate
1.16%
1.34%
1.23%
0.63%
0%
1.75%
Expected
dividends
0%
0%
0%
0%
0%
0%
$0.04
$0.04
$0.04
190%
5 years
0%
0%
70
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
All share-based payment charges are calculated using the fair value of options.
For the options granted prior to 30th June 2018, expected volatility was determined by reviewing
benchmark values from comparator companies. For the options granted after 30th June 2018,
expected volatility was determined by reference to the volatility of historic trading prices of the
Company’s shares.
23. Financial instruments
Capital risk management
The Company manages its capital to ensure that entities in the Group will be able to continue as
a going concern while maximising the return to stakeholders. The overall strategy of the Company
and the Group is to minimise costs and liquidity risk.
The capital structure of the Group consists of equity attributable to equity holders of the parent,
comprising issued share capital, foreign exchange and other reserves and retained earnings as
disclosed in the Consolidated Statement of Changes of Equity.
The Group is exposed to a number of risks through its normal operations, the most significant of
which are interest, credit, foreign exchange and liquidity risks. The management of these risks is
vested to the Board of Directors.
The sensitivity has been prepared assuming the liability outstanding was outstanding for the whole
period. In all cases presented, a negative number in profit and loss represents an increase in
finance expense / decrease in interest income.
Credit risk
Credit risk is the risk that the Group will suffer a financial loss as a result of another party failing to
discharge an obligation and arises from cash and other liquid investments deposited with banks
and financial institutions and receivables from the sale of crude oil.
For deposits lodged at banks and financial institutions these are all held through a recognised
financial institution. The maximum exposure to credit risk is $450,000 (2021: $1,244,000). The
Group does not hold any collateral as security.
The carrying value of cash and cash equivalents and financial assets represents the Group’s
maximum exposure to credit risk at year end. The Group has no material financial assets that are
past due.
The Company has made unsecured loans at a simple interest rate of 5% to its subsidiary
companies. Although the loans are repayable on demand, they are unlikely to be repaid until the
projects become successful and the subsidiaries start to generate revenues. An assessment of the
expected credit loss arising on intercompany loans is detailed in note 6 to the parent Company
financial statements.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices. Market risk for the Company comprises of currency risk
(discussed below) and interest rate risk. Since there are no variable interest-bearing loans in the
Group. No risk is therefore identified.
Currency risk
Foreign currency risk can only arise on financial instruments that are denominated in a currency
other than the functional currency in which they are measured. Translation-related risks are
therefore not included in the assessment of the entity’s exposure to currency risks. Translation
exposures arise from financial and non-financial items held by an entity (for example, a subsidiary)
with a functional currency different from the Group’s presentational currency. However, foreign
currency-denominated inter-company receivables and payables which do not form part of a net
investment in a foreign operation would be included in the sensitivity analysis for foreign currency
71
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
risks; this is because, even though the balances eliminate in the consolidated balance sheet, the
effect on profit or loss of their revaluation under IAS 21 is not fully eliminated.
A 10% increase in the strength of the pound sterling against the US dollar would cause an
estimated increase of $161,000 (2021: $480,000 increase) in the loss after tax of the Group for the
year ended 31 December 2022, with a 10% weakening causing an equal and opposite decrease.
The impact on equity is the same as the impact on loss after tax.
The Group’s cash and cash equivalents and liquid investments are mainly held in US dollars,
pounds sterling and Georgian Lari. At 31st December 2022, 12% of the Group’s cash and cash
equivalents and liquid investments were held in pounds sterling. 74% in Georgian Lari and the
remainder in US dollars, Euros and Canadian dollars (31st December 2021: 3% in pounds sterling,
88% in Georgian Lari and the remainder in US dollars, Euros and Canadian dollars).
Liquidity risk
Liquidity risk arises from the possibility that the Group and its subsidiaries might encounter difficulty
in settling its debts or otherwise meeting its obligations related to financial liabilities. In addition to
equity funding, additional borrowings have been secured in the past to finance operations. The
Company manages this risk by monitoring its financial resources and carefully plans its
expenditure programmes. Financial liabilities of the Group comprise trade payables which mature
in less than twelve months.
24. Categories of financial instruments
In terms of financial instruments, these solely comprise of those measured at amortised cost and
are as follows:
31st
December
2022
31st December
2021
$’000
1,694
1,694
450
347
798
$’000
1,556
1,556
1,244
657
1,901
Liabilities at amortised cost
Cash and cash equivalents at amortised cost
Financial assets at amortised cost
No collateral has been pledged in relation thereto.
25. Subsidiaries
At 31st December 2022, the Group consists of the following subsidiaries, which are wholly owned
by the Company.
Company
Country of
Incorporation
Block Norioskhevi Ltd
Satskhenisi Ltd
Georgia New Ventures Inc.
Block Operating Company LLC Georgia
Block Rustaveli Limited
South Samgori Limited
Didi Lilo & Nakarala Limited
British Virgin Islands
Marshall Islands
Bahamas
British Virgin Islands
British Virgin Islands
British Virgin Islands
72
Proportion
of voting
rights and
equity
interest
2022
100%
100%
100%
100%
100%
100%
100%
Proportion
of voting
rights and
equity
interest
2021
100%
100%
100%
100%
100%
-
-
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Subsidiaries - Nature of business
The principal activity of Georgia New Ventures Inc, Satskhenisi Ltd, Block Norioskhevi Ltd and
Block Rustaveli Limited is oil and gas development and production.
The principal activity of Block Operating Company LLC is to be the operator of the oil and gas
licenses held in Georgia.
The principal activity of South Samgori Limited and Didi Lilo & Nakarala Limited is oil and gas
exploration. These companies were both incorporated on 28th October 2022.
Registered office
The registered office of Georgia New Ventures Inc. is Bolam House, King and George Streets, P.O.
Box CB 11.343, Nassau, Bahamas.
The registered office of Satskhenisi Ltd is Trust Company Complex, Ajeltake road, Ajeltake Island,
Majuro, Marshall Islands MH96960.
The registered office of Block Norioskhevi Ltd is Trident Chambers, P.O.Box 146, Road Town,
Tortola, British Virgin Islands.
The registered office of Block Operating Company LLC is 13A Tamarashvili Street, Tbilisi 0162,
Georgia.
The registered office of Block Rustaveli Limited is Craigmuir Chambers, Road Town, Tortola,
VG1110, British Virgin Islands.
The registered office of South Samgori Limited and Didi Lilo & Nakarala Limited is Woodbourne
Hall, Road Town, Tortola, British Virgin Islands.
26. Commitments
Commitments at the reporting date that have not been provided for were as follows:
Operating lease commitment
At 31st December 2022 and 31st December 2021, the total of future minimum lease payments under
non-cancellable operating leases for each of the following periods was:
Within 1 year
Between 1 and 5 years
Total
31st December
2022
31st December
2021
$'000
269
-
269
$'000
-
-
-
Short term leases are leases with a lease term of 12 months or less without a purchase option and
are recognised on a straight-line basis as an expense in the profit or loss account.
27. Related party transactions
Key management personnel comprises of the Directors and details of their remuneration are set
out in Note 7 and the Remuneration Report.
The Company secured a $2m loan facility after the year end (see note 28 for more details). The
draw down on this loan included the following related parties:
Paul Haywood - $90,000
Key Seymour - $100,000
73
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
28. Events occurring after year end
On 10th January 2023, the Company announced that Ken Seymour had stood down from the Board
to take up a position as the Company’s Chief Operating Officer.
On 2nd February 2023, the Company announced that it had secured additional funding through a
senior secured loan facility of $2m, of which US$1.06 million was drawn down with various existing
shareholders and member of Block’s Management team. The facility is for a term of 18 months
and carries an interest rate of 16% per annum. Each lender will also receive warrants with a 3
year expiry date and exercise price of 1.7p per Ordinary share. A total of 25,330,249 warrants
were issued in relation to this draw down.
On 9th March 2023, the Company announced that it had closed the farm-out of part of XIB to GOGL.
On 3rd April 2023, the Company announced the successful test of well WR-B01Za.
74
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Parent Company Statement of Financial Position as at 31st December 2022
Company number: 05356303
Non- current assets
Investments
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Capital and reserves attributable to
equity shareholders
Share capital
Share premium
Other reserves
Foreign exchange reserve
Accumulated deficit
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Note
4
5
6
7
8
9
2022
$’000
6,209
1
6,210
25,340
112
25,452
2021
$’000
6,939
4
6,943
25,628
133
25,761
31,662
32,704
3,565
34,765
4,525
(360)
(11,657)
30,838
824
824
3,482
34,625
10,260
366
(16,803)
31,930
774
774
Total equity and liabilities
31,662
32,704
The Company has taken advantage of the exemption under section 408 of the Companies Act
2006 by choosing not to present its individual Statement of Comprehensive Income and related
notes that form part of these approved financial statements.
The Company’s loss for the year from continuing operations is $1,661,000 (2021: loss of
$4,384,000).
The financial statements were approved by the Board of Directors and authorised for issue on 10th
May 2023 and were signed on its behalf by:
Paul Haywood
Director
The notes on pages 78 to 82 form part of these financial statements.
75
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Parent Company Statement of Changes in Equity as at 31st December 2022
Balance at 31st December 2020
Comprehensive income
Loss for the year
Exchange differences on
translation of foreign operations
Total comprehensive income for
the year
Transactions with owners
recognised directly in equity
Shares issued
Foreign exchange rate correction
Share based payments
Options exercised
Options expired
Total transactions with owners
Balance at 31st December 2021
Comprehensive income
Loss for the year
Exchange differences on
translation of foreign operations
Total comprehensive income for
the year
Transactions with owners
recognised directly in equity
Shares issued
Share based payments
Options exercised
Options relinquished
Options expired
Total transactions with owners
Balance at 31st December 2022
Share
capital
$’000
3,336
Share
premium
$’000
34,234
Accumulated
deficit
$’000
(12,711)
Other
reserve
$’000
9,121
Foreign
currency
reserve
$’000
449
Total
equity
$’000
34,429
-
-
-
52
17
-
77
-
146
3,482
-
-
-
27
-
56
-
-
83
3,565
-
-
-
255
-
-
136
-
391
34,625
-
-
-
140
-
-
-
-
140
34,765
(4,384)
-
(4,384)
-
-
-
210
82
292
(16,803)
(1,661)
-
(1,661)
-
-
-
6,389
418
6,807
(11,657)
-
-
-
-
(1)
1,494
(272)
(82)
1,139
10,260
-
(4,384)
(66)
(66)
(66)
(4,450)
-
(17)
-
-
-
(17)
366
307
(1)
1,494
151
-
1,951
31,930
-
-
-
-
(1,661)
(726)
(726)
(726)
(2,387)
-
1,072
-
(6,389)
(418)
(5,735)
4,525
-
-
-
-
-
-
(360)
167
1,072
56
-
-
1,295
30,838
76
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Parent Company Statement of Cashflows for the Year Ended 31st December 2022
Note
2022
$'000
2021
$'000
Cash flow from operating activities
Loss for the year before income tax
Adjustments for:
Depreciation
Intercompany interest/ finance income
Increase in ECL provisions for loans
Creditors paid in shares
Share based payments expense
Foreign exchange movement
Operating cash flows before movements in working
capital
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Cash flow from investing activities
Cash from acquisition of BRL
Finance income
Expenditure in respect of property, plant and equipment
Inter-Group amounts received/ (drawn down)
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issue of ordinary share capital
Finance costs
Net cash inflow from financing activities
Net (decrease) in cash and cash equivalents in the
year
Cash and cash equivalents at start of year
Effects of foreign exchange
Cash and cash equivalents at end of year
2
6
9
7
(1,661)
(4,384)
3
(1,188)
-
167
1,035
9
5
(2,558)
3,205
-
1,449
4
(1,635)
(2,279)
113
52
(1,470)
-
-
-
1,452
1,452
-
(1)
(1)
(19)
133
(2)
112
(9)
(26)
(2,314)
278
-
(1)
(4,920)
(4,643)
1,465
-
1,465
(5,492)
5,657
(32)
133
77
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Notes Forming Part of the Parent Company Financial Statements
1. Accounting policies
Basis of preparation
These financial statements have been prepared on a historical cost basis and in accordance with
UK-adopted international accounting standards and as regards the Company financial statements,
as applied in accordance with the requirements of the Companies Act 2006. All accounting policies
are consistent with those adopted by the Group. These accounting policies are detailed in the
notes to the consolidated financial statements, note 1. Any deviations from these Group policies
by the Company are detailed below.
Going concern
The Directors have prepared cash flow forecasts for 24 months from the date of signing these
financial statements. The Group’s forecasts are reviewed regularly to assess whether any actions
to curtail expenditure or cut costs are required.
The Group’s operations presently generate sufficient revenues to cover operating costs and capital
expenditures, supporting
the Group’s accounts on
a going concern basis.
the continued preparation of
The directors are conscious that oil prices have been volatile during the past few years and could
rise further but could also fall back in the year ahead and that future production levels depend on
both depletion rates from existing wells and the success of future drilling. As part of
their going concern assessment, the directors have examined multiple scenarios in which oil prices
and/or future production levels fall substantially and have concluded that it remains possible that
future revenues in at least some scenarios might not cover all operating costs and planned capital
expenditures, creating a material uncertainty that may cast doubt over the Group’s ability to
continue as a going concern. Whilst acknowledging this material uncertainty, the directors remain
confident of making cost savings if required; therefore, they consider it appropriate to prepare the
financial statements on a going concern basis. The financial statements do not include the
adjustments that would result if the Group were unable to continue as a going concern.
Investments in subsidiaries
Investments in subsidiaries are recorded at cost. The Company assesses investments for
impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. If any such indication of impairment exists, the Company makes an estimate
of its recoverable amount. Where the carrying amount of an investment exceeds its recoverable
amount, the investment is considered impaired and is written down to its recoverable amount.
Where these circumstances have reversed, the impairment previously made is reversed to the
extent of the original cost of the investment.
2. Employees
Employment costs consist of:
Wages and salaries
Pension
Share based payments
Social security costs
Year ended
31st December
2022
$’000
Year ended
31st December
2021
$’000
813
49
1,035
91
1,988
651
55
1,449
210
2,365
The average monthly number of employees during the year was 10 (2021: 13) split as follows:
78
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Management
Technical
Administration
3. Directors’ emoluments
Year ended
31st December
2022
$’000
Year ended
31st December
2021
$’000
6
3
1
10
5
6
2
13
Directors’ Emoluments are disclosed in the Remuneration Report of the consolidated financial
statements.
4.
Investments
Shares in Group undertakings
Balance at 1 January
FX movement on translation of assets
Balance at 31 December
2022
$’000
6,939
(730)
6,209
2021
$’000
7,027
(88)
6,939
Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid.
At 31st December 2022, the carrying amount of the Company’s net assets of $30,838,000
exceeded the Group’s net assets of $27,200,000. This is identified by IAS 36 Impairment of Assets
as an indicator that assets may be impaired. Following a review of the assets held by the Company,
the Directors do not believe an impairment is necessary at this time, but will keep this under review.
5. Property, plant and equipment
Cost
At 1st January 2022
Additions
At 31st December 2022
Depreciation
At 1st January 2022
Depreciation charge
At 31st December 2022
Carrying amount
At 1st January 2022
At 31st December 2022
6. Trade and other receivables
Prepayments
Other receivables
Amounts due from Group undertakings
79
Computer
equipment
$'000
Office
equipment
$'000
16
-
16
(13)
(3)
(16)
3
-
1
-
1
-
-
-
1
1
2022
$’000
195
102
25,043
Total
$'000
17
-
17
(13)
(3)
(16)
4
1
2021
$’000
27
383
25,218
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
All of the above amounts are due within one year.
25,340
25,628
All trade and other receivables are denominated in pounds sterling. Amounts due from Group
undertakings are denominated in US dollars and repayable on demand. The Company charges
5% interest per annum on intercompany loans.
Under IFRS 9, the Expected Credit Loss (“ECL”) Model is required to be applied to the
intercompany loans receivable from subsidiary companies, which are held at amortised cost. An
assessment of the expected credit loss arising on intercompany loans has been calculated and a
loss allowance of $3,710,000 has been provided for in the parent Company financial statements
($3,710,000 in 2021). No further impairment was indicated in the current year.
7. Cash at bank
Cash and cash equivalents
2022
$’000
112
2021
$’000
133
Cash and cash equivalents consist of balances in bank accounts used for normal operational
activities. The bank account is held within an institution with a credit rating of A-1.
At 31 December 2022, 53% of the cash balances held by the Company were held in US Dollars
and the remained in UK sterling.
8. Share capital
Details of share capital and movements in the year are set out in note 18 to the consolidated
financial statements.
9. Trade and other payables
Trade and other payables
Accruals
2022
$’000
316
508
824
2021
$’000
296
478
774
Trade and other payables at 31st December 2022 comprised balances in US dollars and pounds
sterling.
10. Categories of financial instruments
In terms of financial instruments, these solely comprise of those measured at amortised cost and
are as follows:
31st December
2022
$’000
31st December
2021
$’000
Trade and other payables
Total financial liabilities at amortised cost
824
824
774
774
The carrying amounts of trade and other payables are considered to be the same as their fair
values due to their short-term nature.
80
Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
Other receivables
Amounts due from Group undertakings
Cash and cash equivalents at amortised cost
Total financial assets at amortised cost
31st December
2022
$’000
31st December
2021
$’000
102
25,043
112
25,257
383
25,218
133
25,734
The amounts due from Group undertakings includes a loss allowance of $3,710,000 (2021:
$3,710,000). The loans are repayable on demand and include a 5% per annum interest rate
charge. They are all denominated in US dollars, which differs from the parent Company’s functional
currency of pounds sterling, and therefore there is an exposure to foreign currency risk. There is
no exposure to price risk as the underlying investments are expected to be held to maturity.
11. Financial and capital risk management
The Company’s exposure to financial risks is managed as part of the Group. Full details about the
Group’s exposure to financial risks and how these risks could affect the Group’s future financial
performance are given in note 23 to the consolidated financial statements. Information specific to
the Company is given below.
Credit risk
For deposits lodged at banks and financial institutions these are all held through a recognised
financial institution. The maximum exposure to credit risk is $112,000 (2021: $133,000). The
Company does not hold any collateral as security.
The Company has made unsecured interest payable loans to its subsidiary companies and
repayments have commenced during the year. Although the loans are repayable on demand, they
are unlikely to be fully repaid until the projects become more developed and the subsidiaries start
to generate increased revenues. An assessment of the expected credit loss arising on
intercompany loans has been calculated and a loss allowance of $3,710,000 has been provided
for in the parent Company financial statements.
Currency risk
Foreign currency risk is the risk that fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates.
The Company undertakes transactions denominated in currencies other than its functional
currency (which is the pound sterling). For transactions denominated in US dollars, the Company
manages this risk by holding US dollar against actual or expected US dollar commitments to act
as an economic hedge against exchange rate movements.
The Company’s cash and cash equivalents and liquid investments are mainly held in pounds
sterling and US dollars. At 31st December 2022, 47% of the Group’s cash and cash equivalents
and liquid investments were held in pounds sterling. A 10% movement in the strength of the pound
sterling against the US dollar would increase the net assets of the Company by $3,084,000.
The exposure to other foreign currency exchange movements is not material. This sensitivity
analysis includes foreign currency denominated monetary items and assumes all other variables
remain unchanged. Whilst the effect of any movement in exchange rates upon revaluing foreign
currency denominated monetary items is charged or credited to the income statement, the
economic effect of holding pounds sterling against actual or expected commitments in pounds
sterling is an economic hedge against exchange rate movements.
Capital management
The capital of the Company is managed as part of the capital of the Group as a whole. Full details,
are contained in note 23 to the consolidated financial statements.
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Block Energy plc – Annual Report and Financial Statements for the Year Ended 31st December 2022
12. Commitments
Commitments at the reporting date that have not been provided for were as follows:
UK operating lease commitment
At 31st December, the total of future minimum lease payments under non-cancellable operating
leases for each of the following periods was:
Within 1 year
Between 1 and 5 years
Total
2022
$'000
81
-
81
2021
$'000
-
-
-
Short term leases are leases with a lease term of 12 months or less without a purchase option and
are recognised on a straight-line basis as an expense in the profit or loss account.
13. Related party transactions
At 31st December 2022, the following subsidiaries owed the parent Company for payments made
and recovered on their behalf.
• Block Norioskhevi Ltd – $3,860,614 (31st December 2021: $3,815,000)
• Georgia New Ventures Inc – $19,950,781 (31st December 2021: $18,212,000)
• Satskhenisi Ltd – $314,044 (31st December 2021: $310,000)
• Block Operating Company LLC – $2,029,351 (31st December 2021: $1,819,000)
• Block Rustaveli Limited - (Debtor of: $1,115,554); (31st December 2021: $1,063,000)
• South Samgori Limited - $2,000
• Didi Lilo & Nakarala Limited - $2,000
A total loss allowance of $3,710,000 was recognised in prior year and no further loss was
recognised in the current year. This amount was recognised in relation to the loans to Satskhenisi
Ltd and Georgia New Ventures Inc. Further detail on related party transactions can be found in
note 27 to the consolidated financial statements. The disclosure of fees paid to consultancy
companies for key management services can be seen in the Remuneration Report.
14. Information included in the notes to the consolidated financial statements
Some of the information included in the notes to the consolidated financial statements is directly
relevant to the financial statements of the Company. Please refer to the following:
Note 6 – Auditors’ remuneration
Note 22 – Share based payments
Note 25 – Subsidiaries
Note 28 – Events occurring after the year end
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