Curzon Energy Plc
Registered company number: 09976843
Annual Report and Financial Statements for the Period Ended 31 December 2018
Curzon Energy Plc
Annual Report 2018
Contents
Page Number
Company Information
Chairman’s Statement
Strategic Report
Directors’ Report
Remuneration Report
Statement of Directors’ Responsibilities in Respect of the Strategic Report,
the Directors’ Report and the Financial Statements
Independent Auditors’ Report to the Members of Curzon Energy Plc
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Company Statement of Cash Flows
Notes to the Company Financial Statements
(i)
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Curzon Energy Plc
Company Information
Annual Report 2018
Directors
John McGoldrick Chairman and Non-Executive Director
Scott Kaintz
Owen May
Brian James Kinane
Thomas Wagenhofer
Thomas Mazzarisi
Stephen J. Schoepfer
Non-Executive Director (resigned on 15 March 2019)
Executive Director (resigned on 6 November 2018)
Executive Director (resigned on 6 November 2018)
Executive Director (resigned on 6 November 2018)
Executive Director (appointed on 26 June 2018)
Non-Executive Director
Company secretary
Sam Quinn (appointed 6 November 2018)
Thomas Mazzarisi (resigned on 6 November 2018)
Company number
09976843
Registered address
Kemp House
152 City Road
London
EC1V 2NX
Independent auditors
Crowe UK LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Company’s Solicitors
First Sentinel
Suite 12A
55 Park Lane
Mayfair, London, W1K 1NA
Financial advisor and broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP
Registrars
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen B63 3DA
Bankers
Barclays Bank plc
Level 27
One Churchill Place
London E14 5HP
Curzon Energy Plc
Chairman’s Statement
Annual Report 2018
I am pleased to present the annual report for the Company covering its results for the year to 31 December
2018.
The Company was incorporated for the purpose of pursuing a targeted acquisition strategy of oil and gas
assets. The Company’s first acquisition occurred on 3 October 2017 when the Company acquired 100% of the
membership interests of Coos Bay Energy LLC (“Coos Bay”), which is the owner and operator of approximately
45,370 acres of coalbed methane leases (“CBM”) in Coos Bay, Oregon, USA, pursuant to a membership
interest purchase agreement dated 20 May 2017.
During the course of the year the Company focused on extended testing of the five existing wells at Coos Bay
with particular emphasis on gaining access to the deeper coal seams that had been previously isolated.
Following several efforts to rework the wells gas flow proved inconsistent and inconclusive. Well re-entries
appeared to stir up additional coal fines in the wellbores resulting in little net gains. Ultimately the view taken
by the Board was that as Curzon had inherited the wells, the observed results were unlikely to be representative
of the performance of new wells drilled by the Company in locations of its choosing, and so did not provide an
accurate indication of the true commercial potential of the Coos Bay project. Analysis of the data gathered will
be carried out to plan a new appraisal programme focusing on the Lower Coaledo formation where 90%+ of
the gas reserves are located. The emphasis in any new efforts will be on controlling the entirety of the appraisal
process from picking representative well locations to drilling and completing using the latest technologies
available with the clear goal of determining the commerciality of the project.
In addition, the Company has announced a memorandum of understanding (“MOU”) with Pared Energy LLC to
develop a conventional gas fairway in the Claiborne Group in Texas. The Company believes that the Texas
Gas Project offers multi-TCF potential with over 1,000ft of stacked pay with expansion opportunities over
250,000 acres. In Texas, Curzon and Pared are seeking to apply modern drilling and completion techniques,
including horizontal wells, to an area of known gas bearing horizons where local techniques and methods have
changed little over past decades.
Phase 1 of the Texas Gas Project will include the drilling and completion of one vertical well with a second
horizontal well to be drilled thereafter. If successful, the parties intend to increase their lease land position and
to drill a three to five well delineation programme before moving on to infill drilling and further expansion. The
Company considers the Texas Gas Project to be an attractive high impact drill-ready opportunity where
appraisal success will bring immediate gas sales utilizing surplus pipeline capacity in the region.
Overall the Board feels that the Texas Gas Project could provide a highly complementary addition to the
Company’s existing project at Coos Bay and together the expanded portfolio would provide investors exposure
to perhaps the most exciting story in the energy space, the increasing importance of US natural gas and LNG
to world markets.
During the course of the year the Board underwent several changes with the focus being to bolster our presence
in the UK where Curzon is listed, and to reduce overheads significantly. Scott Kaintz joined the Board in June
2018 and was subsequently appointed CEO in November of that year. Scott brings with him an extensive
background of running small cap natural resource businesses and will be tasked to both drive the projects
forward while expanding our UK investor base.
The Group incurred a loss of US$1,953,708 in the period ended 31 December 2018. The majority of this loss
comprised expenditures in relation to the well testing and rework operations conducted at Coos Bay during the
course of the year, as well as an impairment of US$575,316 reflecting specific investments into Coos Bay that
may not prove part of the future plans for the project.
With the first full year of trading now behind, I and my fellow Directors look forward to pursuing our US focused
natural gas strategy with renewed vigour and look forward to updating shareholders on our further progress in
due course.
John McGoldrick
Non-Executive Chairman
29 April 2019
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Curzon Energy Plc
Strategic Report
Financial Results
Annual Report 2018
The Company was formed in January 2016 to undertake acquisitions in the oil and gas sector. During
the year ended 31 December 2018, the Company primarily conducted gas exploration and extended well
testing activities at Coos Bay while examining additional opportunities in the natural gas sector.
The Group loss for the year to 31 December 2018 was US$1,953,708 (2017: US$1,833,381). There were
no revenues and the majority of the loss related to Company overheads and expenditures related to
appraisal activities at Coos Bay.
The loss per share was US$0.03 (2017: loss per share US$0.03).
The Group’s cash balances at the end of 2018 totalled US$125,621 (2017: US$1,595,035), and the
Company’s cash and undrawn borrowing resources are considered sufficient to meet its obligations, in
particular following a significant reduction in corporate overheads and staffing implemented during the
latter half of 2018.
Following mixed results from well testing operations at Coos Bay, the Directors are now focused on
acquiring a working interest in a Texas gas project and intend to reassess the Coos Bay results in 2018
and then use that work to create revised go-forward plans. As such an impairment loss of US$ 575,316
has been recognized in the accounts to reflect that proportion of 2018 expenditure at Coos Bay that is not
deemed likely to be viable for future development.
The Board believes that the Company will be able to raise, as required, sufficient cash and/or reduce its
commitments to enable it to continue these objectives, and to continue to meet, as and when they fall
due, its liabilities for at least the next twelve months from the date of approval of these financial
statements. The financial statements have, therefore, been prepared on the going concern basis.
Following reductions made during 2018, the Group has 3 members of staff (including Directors).
Principal activities
The Company was incorporated in England and Wales on 29 January 2016 as an investment company
to acquire oil and gas assets. Its first acquisition was of Coos Bay. The Directors have identified a second
complementary gas project that they seek to acquire an interest in, and they expect to return to the market
to acquire and/or raise funds for this and potentially other projects in the future.
Coos Bay owns certain CBM and related assets, which it acquired on 4 November 2016 by acquiring
Westport Energy Acquisition, Inc. and its wholly owned subsidiary Westport Energy LLC (the ‘US Group’)
from Westport Energy Holdings Inc. (the “Acquisition”), a publicly held company trading on the OTC Pink
Market. The US Group had been operating a CBM business in Coos Bay, Oregon for 6 years. At the time
of the Acquisition, the US Group’s CBM business consisted of leases covering approximately 45,370
acres in Coos Bay, Oregon.
The Group’s business continues to be operated through the US Group, with a focus on oil and gas
exploration, appraisal and development, with an initial goal of determining the ultimate commerciality of
the Coos Bay project, as well as progressing any other projects that may be acquired.
The Company is a holding company with the following subsidiaries being part of the US Group:
Name
Country of
Incorporation
Proportion of
equity
ownership
Principal activity
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Curzon Energy Plc
Annual Report 2018
Coos Bay Energy
LLC
Nevada, USA
100%
Gas Exploration &
Development
Westport Energy
Acquisition, Inc.
Westport Energy,
LLC
Delaware, USA
100%
Holding Company
Delaware, USA
100%
Gas Exploration &
Development
Coos Bay LLC, which employs the Group’s employees and conducts operations in the Coos Bay Basin
area, is held directly by the Company. Its two indirectly owned subsidiaries are Westport Energy
Acquisition Inc. and its wholly-owned subsidiary, Westport Energy LLC, which are held by Coos Bay
Energy LLC.
Review of the business
2018 saw the Company conducting extensive well testing operations at Coos Bay in Oregon where the
gas flow rates proved inconsistent and inconclusive. By the conclusion of the year the Company felt that
the observed well test results were unlikely to be representative and so did not provide an accurate
indication of the true commercial potential of the Coos Bay project. Well re-entries appeared to stir up
additional coal fines in the wellbores resulting in little net gains. This was exacerbated by the fact that the
wells tested were nearly ten years old and had been shut in for most of that period, had been drilled and
completed by previous operators, and were largely not perforated in the coal horizons where the majority
of the gas reserves are located.
As such, the Company announced its intention to augment the Coos Bay project with a complementary
project that offered significant multi-trillion cubic feet (“TCF”) of upside in an established oil and gas region
in Texas, USA. The Company proceeded to sign a memorandum of understanding in December 2018
announcing its intention to pursue joint development of this project.
Key performance indicators (KPIs)
The Directors have identified the following key performance indicators (‘KPIs’) that the Company will track
over 2019 and into future years. These will be refined and augmented as the Group’s business matures.
The Directors consider that the KPIs are:
i)
ii)
iii)
iv)
A well-funded business in terms of cash resources and operating cashflows; and
Appraisal and drilling results of the Company’s projects,
Entering production and then monitoring levels of production of gas and condensates; and
Operating costs once in production.
Principal Risks and Risk Management
Exploration is an inherently high-risk business:
• Even the most promising prospects can have failures for many reasons, such as:
o The gas assets may not be found in commercial quantities if there are errors in the
underlying geological assumptions or analysis.
o Hydrocarbons may have been present but escaped due to unexpected geological events.
o The reservoir may not flow hydrocarbons at commercially viable rates of flow.
o The drilling may encounter technical problems which make it impossible or too expensive
to reach the target.
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Curzon Energy Plc
Annual Report 2018
o The ability of the Group to exploit and develop gas reserves depends on its current
leases. There is no guarantee that existing leases will be continued beyond their primary
term or additional leases acquired on attractive terms.
•
The Company may take on commitments for which it then cannot find adequate funding. Although
the Company can then potentially sell all or part of its assets:
o There is no guarantee it could find a buyer.
o Even if it does find a buyer, the transaction may take too long, and the Company’s cash
resources may become exhausted.
The Company’s risk mitigation strategies include the following:
• Partnering with key experts that have demonstrated an ability to determine the presence or
absence of hydrocarbons.
• Utilizing the Directors’ experience who have excellent technical, commercial or local knowledge
as to where to locate assets.
• Securing the support of a number of key private shareholders, and actively pursuing other sources
of funding.
• Utilizing third parties to assist with the management of currency risk.
Corporate Responsibility
The Company takes its responsibilities as a corporate citizen seriously. The Board’s primary goal is to
create shareholder value but in a responsible way which serves all stakeholders.
Governance
The Board considers sound governance as a critical component of the Company’s success and the
highest priority. The Company has an effective and engaged Board, with a strong non-executive presence
drawn from diverse backgrounds and with well-functioning governance committees. Through the
Company’s compensation policies and variable components of employee remuneration,
the
Remuneration Committee of the Board seeks to ensure that the Company’s values are reinforced in
employee behaviour and that effective risk management is promoted.
Analysis by Gender
Category
Directors
Senior Managers
Other Employees
Male
3
0
0
Female
0
0
0
Employees and their development
The Company is dependent upon the qualities and skills of its employees and their commitment plays a
major role in the Company’s business success. Employees’ performance is aligned to the Company’s
goals through an annual performance review process and via incentive programmes. The Company
provides employees with information about its activities through regular briefings and other media. The
Company operates a share option and warrant scheme operated at the discretion of the Remuneration
Committee.
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Curzon Energy Plc
Diversity and inclusion
Annual Report 2018
The Company does not discriminate on the grounds of age, gender, nationality, ethnic or racial origin,
non-job-related-disability, sexual orientation or marital status. The Company gives due consideration to
all applications and provides training and the opportunity for career development wherever possible. The
Board does not support discrimination of any form, positive or negative, and all appointments are based
solely on merit.
Health and safety
The Company endeavours to ensure that the working environment is safe and healthy and conducive to
the wellbeing of employees who are able to balance work and family commitments. The Company has a
Health and Safety at Work policy which is reviewed regularly by the Board and is committed to the health
and safety of its employees and others who may be affected by the Company’s activities. The Company
provides the information, instruction, training and supervision necessary to ensure that employees are
able to discharge their duties effectively. The Health and Safety procedures used by the Company ensure
compliance with all applicable legal, environmental and regulatory requirements, as well as its own
internal standards.
Outlook
The Company’s near-term goals are to develop the business through the acquisition of a meaningful
interest in the Texas gas project currently identified, while reassessing the way forward at Coos Bay
through a top-down clean-slate review process.
While the performance of the inherited wells at Coos Bay was disappointing during 2018, the fact that the
Company did not drill its own wells nor conduct an industry standard appraisal programme indicates that
the commerciality of the field cannot yet be definitively determined. With significant gas reserves
previously identified at Coos Bay, the Board believes that a detailed review of all the technical data and
operational activities to date by both third parties historically and by the Company over the last year, will
provided insightful guidance for all future work programmes at the Coos Bay project.
In Texas, the Company remains very excited by the potential to take part in near-term drilling of a high-
impact multi-TCF conventional gas appraisal programme. The major attraction of the Texas gas project
stems from the substantial upside potential expected from the application of modern drilling and
completion methods that have been highly successful in regional analogues throughout the Texas Gulf
Coast and across the border into Mexico, to the project and the surrounding area, that continue to apply
traditional drilling methods and have not seen any substantial changes in these techniques for many
years. The Board also feels the Texas gas project is complementary to its existing CBM asset at Coos
Bay.
Together the proposed Texas gas project and Coos Bay offer Curzon’s investors exposure to the rise of
natural gas as the ideal transition fuel to a decarbonized future, and both its production, and now major
gas exports on a wide scale from the United States in the form of liquefied natural gas (“LNG”). These
developments have clearly impacted world gas markets and the continued growth of LNG exports from
the US is expected to have many positive effects from changing the way gas is priced both in the US and
abroad to reducing European reliance on Russia and other potentially politicised supplies. Curzon’s gas
focus positions it to benefit from these significant ongoing energy developments over the coming years.
Signed by order of the Board.
Scott Kaintz
Chief Executive Officer
29 April 2019
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Curzon Energy Plc
Annual Report 2018
Directors Report for the period ended 31 December 2018
The Directors present their report on the Company, together with the audited financial statements of the
Company for the year ended 31 December 2018.
Cautionary statement
The review of the business and its future development in the Strategic Report has been prepared solely
to provide additional information to shareholders to assess the Company’s strategies and the potential for
these strategies to succeed. It should not be relied on by any other party for any other purpose. The
review contains forward looking statements which are made by the Directors in good faith based on
information available to them up to the time of the approval of the reports and should be treated with
caution due to the inherent uncertainties associated with such statements
Results and dividends
Given the nature of the business and its development strategy, it is unlikely that the Board will recommend
a dividend in the next few years. The Directors believe the Company should seek to re-invest any profits
to fund the Company’s growth strategy over the short- and medium-term horizons.
Directors’ insurance and indemnities
The Directors have the benefit of the indemnity provisions contained in the Company’s Articles of
Association (‘Articles’), and the Company has maintained throughout the year Directors’ and officers’
liability insurance for the benefit of the Company, the Directors and its officers. The Company has entered
into qualifying third-party indemnity arrangements for the benefit of all its Directors in a form and scope
which comply with the requirements of the Companies Act 2006 and which were in force throughout the
year and remain in force.
Business review and future developments
Details of the business activities and developments made during the period can be found in the Strategic
Report and in note 1 to the Financial Statements respectively.
Disclosure of information to auditor
The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they
are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and
each director has taken all the steps that he ought to have taken as a director to make himself aware of
any relevant audit information and to establish that the Company’s auditor is aware of that information.
Financial instruments and risk management
Disclosures regarding financial instruments are provided within note 20 to the Financial Statements.
Capital structure and issue of shares
Details of the Company’s share capital, together with details of the movements during the period are set
out in note 17 to the Financial Statements. The Company has one class of Ordinary Shares which carry
no right to fixed income.
Post balance sheet events
On 1 March 2019 the Company announced the placing of 6,012,655 new ordinary shares of £0.01 each
at a price of £0.0158 per share. Investors in these shares also received 1 warrant for every 2 placing
shares purchased exerciseable into ordinary shares at a price of £0.0158 per ordinary share for a period
of twenty four months following the placing. The gross proceeds raised from the placing were £95,000.
The Company further announced that YA Global Investments, an entity related to the Company’s largest
shareholder, would commence a draw down of a matching amount to the completed placing. At the time
of the annoucement $900,000 was undrawn on the $1,000,000 facility.
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Curzon Energy Plc
Post balance sheet events (continued)
Annual Report 2018
On 16 April 2019 the Company signed an amendment letter with YA Global Investment, LP, in which the
parties agreed that in respect of the first tranche of $100,000, and in respect of any further tranches to be
drawn down, the Company shall pay the total principle amount outstanding on the last business day of
October 2020.
On 15 March 2019 the Company announced that Brian Kinane had resigned as a Director of the
Company.
Directors
The Directors of the Company who have served during the period and at the date of this report are:
Director
Role
John McGoldrick
Chairman and Non-Executive
Director
Date of
appointment
Date of
Resignation
Board
Committee
4/10/2017
N, R, A
Scott Kaintz
Executive Director
27/06/2018
Stephen Schoepfer
Executive Director
29/01/2016
06/11/2018
Thomas Mazzarisi
Executive Director
29/01/2016
06/11/2018
Thomas Wagenhofer
Executive Director
27/09/2016
06/11/2018
Brian Kinane
Non-Executive Director
29/01/2016
15/03/2019
Owen May
Non-Executive Director
27/09/2016
N, R, A
Board Committee abbreviations are as follows: N = Nomination Committee; A = Audit and Risk
Committee; R = Remuneration Committee
Board of Directors
Details of the current Directors and their backgrounds are as follows:
John McGoldrick (Chairman and Non-Executive Director, aged 61)
John McGoldrick has over thirty years of experience in a variety of senior management roles, notably at
Enterprise Oil where he was responsible for its US operations up until Shell’s takeover in 2002. Since
then Mr. McGoldrick has served as executive chairman of Caza Oil & Gas Inc. (formerly Falcon Bay
Energy LLC), a US onshore exploration and production company, which went public in Toronto and
London in 2007, becoming non-executive chairman in 2010. From 2008 to 2013, Mr. McGoldrick was a
non-executive director of Vanguard Natural Resources LLC, a NYSE-listed Oil & Gas company focused
on the US. In January 2012 Mr. McGoldrick joined Dart Energy International as CEO, subsequently
becoming CEO of Dart Energy in March 2013. He held this post until Dart Energy’s takeover by IGas at
the end of 2014. Mr. McGoldrick holds a Bachelor of Engineering in Chemical Engineering with
Management Economics from University of Bradford.
Scott Kaintz (Executive Director and Chief Executive Officer, aged 41)
Scott has extensive experience leading, funding and operating publicly traded natural resource
exploration and development businesses on the London markets. He started his career as a US Air Force
Officer working across Europe, the Middle East and Central Asia. He subsequently held managerial and
technology roles in the defence sector in Europe before transitioning to corporate finance and investment
positions focused primarily on capital raising and making debt and equity investments in small-cap listed
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Curzon Energy Plc
Annual Report 2018
companies. Scott has significant experience in emerging markets, with a particular emphasis on the
countries of the former Soviet Union. Scott holds a BSLA in Russian language and Russian Area Studies
from Georgetown University as well as MBA degrees from Columbia Business School and London
Business School. He is also a Director of Regency Mines Plc and Red Rock Resources Plc.
Owen May (Non-Executive Director, aged 58)
Mr. Owen May is an American banker with over 30 years of experience on Wall Street. He currently serves
as a Managing Director of MD Global Partners, a full-service investment-banking firm, and is actively
involved in a broad range of investment activities in Israel, China, and Europe.
Mr. May started his career at Lehman Brothers as a Financial Advisor in the high net worth division in
1985. After leaving Lehman Brothers in 1989, Mr. May joined D.H. Blair & Co., a small boutique firm on
Wall Street.
In 1993, Mr May went on to establish May Davis Group, a full-service investment banking firm on Wall
Street that offered a full range of investment banking, research, sales, trading and retail brokerage
services. The firm had offices in New York and Baltimore, and catered to a niche clientele, mainly small
to middle-sized firms that were too small to gain access to large investment banking services.
In 2007 Mr. May established MD Global Partners LLC, a firm that specializes in corporate finance,
mergers & acquisitions, restructuring and business development.
Mr. May has been involved in advising, restructuring and taking public many biotech firms and is actively
seeking investment opportunities in start-up companies in the medical science sector, especially in Israel.
In 2013, Mr May acted as an advisor to IntelliCell Biosciences Inc, a regenerative medicine company
utilizing adult autologous vascular fraction cells (SVFCs) derived from the blood vessels in lipoaspirate,
to advise on the company's restructuring, corporate positioning, and strategic opportunities.
Following his undergraduate degree in Biology at University of Miami, Mr. May earned an MBA in Finance
from Duke University’s Fuqua School of Business, where he currently sits on the Board of Visitors and
offers career coaching and opportunities to programme participants. He also continues to hold a position
on the President’s Council for the University of Miami.
Directors’ interests in shares
Directors’ interests in the shares of the Company at the date of this report are disclosed below.
Director
Ordinary shares held
% held
John McGoldrick
Scott Kaintz
Owen May
316,455
949,367
-
0.38
1.14
-
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Curzon Energy Plc
Substantial interests
Annual Report 2018
As at 17 April 2019, the Company has been advised of the following significant interests (greater than
3%) in its ordinary share capital:
Shareholder
Ordinary shares held
% held
Jim Nominees Limited
Regency Mines PLC
Queensbury Inc
55,889,763
6,467,500
4,000,000
67.31
7.79
4.82
Except as referred to above, the Directors are not aware of any person who was interested in 3% or more
of the issued share capital of the Company or could directly or indirectly, jointly or severally, exercise
control.
Corporate Governance
As a Company listed on the Standard Segment of the Official List of the UK Listing Authority, the Company
is not required to comply with the provisions of the UK Corporate Governance Code. However, the Board
is committed to maintaining high standards of corporate governance and, so far as appropriate given the
Company’s size and the constitution of the Board and complies with the Corporate Governance
Guidelines for Small and Mid-Sized Companies (the “QCA Code”).
The Board
The Board currently comprises one executive Director and two non-executive Directors. The Board is
ultimately responsible for the day-to-day management of the Company’s business, its strategy and key
policies. Members of the Board are appointed by the Shareholders. The Board also has power to appoint
additional directors, subject to such appointments being approved by Shareholders. At least six board
meetings are held per year.
Director
Number of Meetings Held
During Tenure
Number of Meetings Attended
John McGoldrick
Scott Kaintz
Steven Schoepfer
Thomas Mazzarisi
Thomas Wagenhofer
Brian Kinane
Owen May
8
4
6
6
6
8
8
8
4
6
6
6
8
8
As prescribed by the QCA Code, the Board has established three committees: An Audit and Risk
Committee, a Remuneration Committee and a Nomination Committee.
Each of the committees were formed on admission of the Company to the Standard Listing Segment on
4 October 2017. The Audit and Risk Committee and the Remuneration Committees have met once each
during 2018.
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Curzon Energy Plc
Audit and Risk Committee
Annual Report 2018
The Audit and Risk Committee, which comprises John McGoldrick and Owen May, is responsible,
amongst other things, for monitoring the Group’s financial reporting, external and internal audits and
controls, including reviewing and monitoring the integrity of the Group’s annual and half-yearly financial
statements, reviewing and monitoring the extent of non-audit work undertaken by external auditors,
advising on the appointment of external auditors, overseeing the Group’s relationship with its external
auditors, reviewing the effectiveness of the external audit process and reviewing the effectiveness of the
Group’s internal control review function. The ultimate responsibility for reviewing and approving the annual
report and accounts and the half-yearly reports remains with the Board. The Audit and Risk Committee
gives due consideration to laws and regulations, the provisions of the UK Corporate Governance Code
and the requirements of the Listing Rules. The Audit and Risk Committee shall meet at least once a year
at appropriate intervals in the financial reporting and audit cycle and otherwise as required.
Remuneration Committee
The Remuneration Committee, which comprises John McGoldrick and Owen May, is responsible,
amongst other things, for assisting the Board in determining its responsibilities in relation to remuneration,
including making recommendations to the Board on the Company’s policy on executive remuneration,
including setting the parameters and governance framework of the Group’s remuneration policy and
determining the individual remuneration and benefits package of each of the Company’s Executive
Directors and the Group. It is also responsible for approving the rules and basis for participation in any
performance related pay-schemes, share incentive schemes and obtaining reliable and up-to-date
information about remuneration in other companies. The Remuneration Committee shall meet at least
once a year.
Nomination Committee
The Nomination Committee, which comprises John McGoldrick as Chairman and Owen May, will identify
and nominate, for the approval of the Board, candidates to fill Board vacancies as and when they arise.
The Nominations Committee will meet as required.
Share dealing policy
The Company has adopted a share dealing policy which sets out the requirements and procedures for
dealings in any of its listed securities. The share dealing policy applies widely to the Directors of the
Company and its subsidiaries, the Company’s employees and person closely associated with them. The
policy complies with the Market Abuse Regulations, which came into effect on 3 July 2016.
Dividend policy
The objective of the Directors is the achievement of substantial capital growth. In the short-term they do
not intend to declare a dividend.
Anti-bribery and corruption policy
The Company has adopted an anti-corruption and bribery policy which applies to the Directors and all
employees of the Company. The Directors believe that the Group, through its internal controls, has
appropriate procedures in place to reduce the risk of bribery and that all employees, agents, consultants
and associated persons are made fully aware of the Group’s policies and procedures with respect to
ethical behaviour, business conduct and transparency.
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Curzon Energy Plc
Annual Report 2018
Health and safety
The safety of the Group’s employees and contractors is critical to its operations. Coos Bay requires its
contractors working on site to comply with all applicable laws in connection with the performance of its
work, including applicable requirements of the Occupational Health and Safety Act and the rules
promulgated thereunder (OSHA). As Coos Bay currently maintains no employees and almost all work on
site is performed by independent contractors, Coos Bay has not developed any formal safety procedures
or training programs beyond those that may be required by OSHA or other applicable laws. The Board
intends to review Coos Bay’s health and safety practices from time-to-time to ensure that they remain
consistent with current industry standards.
Relations with shareholders
As detailed further below, the Directors seek to build on a mutual understanding of objectives between
the Company and its shareholders by meeting to discuss long term issues and receive feedback,
communicating regularly throughout the year and issuing trading updates as appropriate. The Board also
seeks to use the Annual General Meeting to communicate with its shareholders.
Fair, balanced and understandable assessment of position and prospects
The Board has shown its commitment to presenting fair, balanced and comprehensible assessments of
the Company’s position and prospects by providing comprehensive disclosures within the financial report
in relation to its activities. The Board has applied the principles of good governance relating to Directors’
remuneration as described below. The Board has determined that there are no specific issues which need
to be brought to the attention of shareholders.
Remuneration strategy
The Company operates in a competitive market. If it is to compete successfully, it is essential that it
attracts, develops and retains high quality staff. Remuneration policy has an important part to play in
achieving this objective. The Company aims to offer its staff a remuneration package which is both
competitive in the relevant employment market and which reflects individual performance and
contribution.
Share options and warrants
Certain Directors have interests in these as follows:
Name
Number of
Options
Warrants
Exercise
Price
or
Vesting
Expiry Date
John McGoldrick
John McGoldrick
John McGoldrick
280,854
280,854
280,854
£0.10
£0.15
£0.30
4 Oct 2018
4 Oct 2022
4 Oct 2019
4 Oct 2022
4 Oct 2020
4 Oct 2022
Communication with shareholders
The Board attaches great importance to communication with both institutional and private shareholders.
Regular communication is maintained with all shareholders through Company announcements, the half-
year Statement and the Annual Report and financial statements.
The Directors seek to build on a mutual understanding of objectives between the Company and its
shareholders. Institutional shareholders are in contact with the Directors through presentations and
meetings to discuss issues and to give feedback regularly throughout the year. With private shareholders,
this is not always practical.
The Board therefore intends to use the Company’s Annual General Meeting as the opportunity to meet
private shareholders who are encouraged to attend, and at which the Board will give a presentation on
the activities of the Company.
11
Curzon Energy Plc
Annual Report 2018
Following the presentation there will be an opportunity to meet and ask questions of Directors and to
discuss development of the business.
The Company operates a website at http://www.curzonenergy.com/investor-relations
The website contains details of the company and its activities; regulatory announcements, Company
announcements, interim statements, preliminary statements and annual reports.
Greenhouse gas emissions
The Group has as yet minimal greenhouse gas emissions to report from the operations of the Company
and its subsidiaries and does not have responsibility for any other emission producing sources under the
Companies Act 2006 (Strategic report and Directors report) Regulations 2014.
Financial Risk Management
The Group is exposed to a variety of financial risks including currency risk, credit risk and liquidity risk.
Some of the objectives and policies applied by management to mitigate these risks are outlined in note
20 to the Consolidated Financial Statements.
Ordinary Share Capital
The Company’s Ordinary Shares of £0.01 per share represent 100% of its total share capital. At a
meeting of the Company every member present in person or by proxy shall have one vote for every
Ordinary Share of which he is the holder. Holders of Ordinary Shares are entitled to receive dividends.
On a winding-up or other return of capital, holders are entitled to share in any surplus assets pro rata to
the amount paid up on their Ordinary Shares. The shares are not redeemable at the option of either the
Company or the holder. There are no restrictions on the transfer of shares.
Independent auditors
During the year, Crowe U.K. LLP was re-appointed as auditor to the Company.
Provision of information to auditors
Each of the persons who are Directors at the time when this Directors' Report is approved has confirmed
that:
•
so far as that Director is aware, there is no information relevant to the audit of which the
Company's auditors are unaware, and;
• each Director has taken all the steps that ought to have been taken as a director in order to be
aware of any information needed by the Company's auditors in connection with preparing their
report and to establish that the Company's auditors are aware of that information.
Signed by order of the board
Scott Kaintz
29 April 2019
12
Curzon Energy Plc
Remuneration Report
Annual Report 2018
The Board of Directors has established a Remuneration Committee. The Remuneration Committee (the
‘Committee’) comprises our two non-executive directors, John McGoldrick and Owen May.
The members of the Remuneration Committee have the necessary experience of executive compensation
matters relevant to their responsibilities as members of such a committee by virtue of their respective
professions, contacts within the minerals industry as well as experience in the broader business
community. In addition, each member of the Remuneration Committee keeps abreast on a regular basis
of trends and developments affecting executive compensation. Accordingly, it is considered that the
Remuneration Committee has sufficient experience and knowledge to set appropriate levels of
compensation. Neither the Company nor the Remuneration Committee engaged independent consultants
to evaluate the levels of compensation during the year ended 31 December 2018.
Committee’s Main Responsibility
The Remuneration Committee is responsible, amongst other things, for assisting the Board in determining
its responsibilities in relation to remuneration, including making recommendations to the Board on the
Company’s policy on executive remuneration, including setting the parameters and governance
framework of the Group’s remuneration policy and determining the individual remuneration and benefits
package for the Company’s Executive Directors and the Group. It is also responsible for approving the
rules and basis for participation in any performance related pay-schemes, share incentive schemes and
obtaining reliable and up-to-date
in other companies. The
recommendations of the Remuneration Committee are submitted to the independent members of the
Board of Directors for consideration and approval. The Remuneration Committee shall meet at least once
a year.
information about remuneration
Statement of Policy on Directors’ Remuneration
The Company’s policy is to set remuneration to attract and retain the highest quality of directors and
senior executives, and to:
•
•
•
•
align their interests with shareholders’,
avoid incentivising excessive risk taking by executives,
be proportionate to the contribution of the individuals concerned, and
be sensitive to pay and employment conditions elsewhere in the group.
The Company is at an early stage of development. As a result, the use of traditional performance
standards, such as corporate profitability, is not considered by the Remuneration Committee to be
appropriate in the evaluation of corporate or directors’ performance. Discretionary bonuses may be paid
to aid staff retention and reward performance.
The Company provides executive directors with base fees which represent their minimum compensation
for services rendered during the financial year. The base fees of directors and senior executives depend
on the scope of their experience, responsibilities, and performance.
The Remuneration Committee has considered the risk implications of the Company’s compensation
policies and practices and has concluded that there is no appreciable risk associated with such policies
and practices since such policies and practices do not have the potential of encouraging an executive
officer or other applicable individual to take on any undue risk or to otherwise expose the Company to
inappropriate or excessive risks. Furthermore, although the Company does not have in place any specific
prohibitions preventing executives from purchasing financial instruments, including prepaid variable
forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset
a decrease in market value of options or other equity securities of the Company granted in compensation
or held directly or indirectly, by the director, the Company is unaware of the purchase of any such financial
instruments by any director.
The Company does not anticipate making any significant changes to its compensation policies and
practices during 2019.
13
Curzon Energy Plc
Directors’ Remuneration
Annual Report 2018
The Directors who held office at 31 December 2018 and who had beneficial interests in the ordinary
shares of the Company are summarized as follows:
Name of Director
John McGoldrick
Scott Kaintz
Directors’ service contracts
Position
Chairman, Non-Executive Director
Chief Executive Officer, Executive Director
John McGoldrick was appointed by the Company with effect from Admission to act as Chairman and a
Non-Executive Director of the Company under a letter of appointment dated 04 October 2017. His
appointment is for an initial term of 36 months and is terminable on three months’ written notice on either
side. He is entitled to a fee of £50,000 per annum.
Owen May was appointed as a Director on 27 September 2016. He has been appointed to act as a Non-
Executive Director of the Company pursuant to a letter of appointment with the Company dated 23 May
2017, which takes effect on Admission. His appointment is for an initial term of 36 months and is
terminable on three months’ written notice on either side. He is entitled to a fee determined by the Board
of up to £10,000 per annum.
Scott Kaintz was appointed as a Director on 27 June 2018. He was appointed to act as an Executive
Director and Chief Executive officer as of 5 November 2018. His appointment is for an initial term of 12
months and continues thereafter until terminated by either party giving four months written notice. He is
entitled to a fee of £75,000 per annum.
Summary Compensation Table (audited)
The following table sets forth the compensation awarded, paid to or earned by each director during 2018:
2018
John McGoldrick
Scott Kaintz
Owen May
Brian James Kinane
Thomas Wagenhofer
Thomas Mazzarisi
Stephen Schoepfer
Total directors’ compensation
Directors’
fees
US$
67,178
16,148
-
-
97,407
103,333
103,333
387,399
Social
security
costs
US$
-
1,968
-
-
-
-
-
1,968
Total cash-
compensation
US$
67,178
18,116
-
-
97,407
103,333
103,333
389,367
Share-based
Payments (options)
US$
37,149
-
-
74,891
149,828
38,750
38,750
339,368
Total
compensation
US$
104,327
18,116
-
74,891
247,235
142,083
142,083
728,735
In 2018, John McGoldrick had through agreement with the Company agreed to defer payment of his
2018 director’s compensation, which at 31 December 2018 totalled £50,000 (US$67,178).
14
Curzon Energy Plc
Summary Compensation Table (audited)
Annual Report 2018
Directors’
fees
US$
16,111
-
-
-
93,052
182,000
182,000
473,163
Social
security
costs
US$
-
-
-
-
-
-
-
-
Total cash-
compensation
US$
16,111
-
-
-
93,052
182,000
182,000
473,163
Share-based
Payments (options)
US$
20,250
-
-
30,366
60,751
-
-
111,367
Total
compensation
US$
36,361
-
-
30,366
153,803
182,000
182,000
584,530
2017
John McGoldrick
Scott Kaintz
Owen May
Brian James Kinane
Thomas Wagenhofer
Thomas Mazzarisi
Stephen Schoepfer
Total directors’ compensation
Share-Based Awards (audited)
The Company has awarded the following share options to the Directors of the Company in accordance
with its share option plan:
Director
John McGoldrick
John McGoldrick
John McGoldrick
Number of
Options or
Warrants
Exercise
Price
Vesting
Expiry Date
280,854
£0.10
10 Apr 2018
10 Apr 2022
280,854
£0.15
10 Apr 2019
10 Apr 2022
280,854
£0.30
10 Apr 2020
10 Apr 2022
The exercise price of the awards exceeded the average share price for the period.
There were no awards of annual bonuses or incentive arrangements in the period. All remuneration was
therefore fixed in nature and no illustrative table of the application of remuneration policy has been
included in this report.
Directors’ interests in shares (audited)
Directors’ interests in the shares of the Company at the date of this report are disclosed below.
Director
Ordinary shares held
% held
John McGoldrick
Scott Kaintz
Owen May
Other Matters subject to audit
316,455
949,367
-
0.38
1.14
-
The Company does not currently have any pension plans for any of the Directors and does not pay
pension amounts in relation to their remuneration.
15
Curzon Energy Plc
Annual Report 2018
On 5 November 2018 the Company agreed to terminate the existing consultant agreements with Steven
Schoepfer (4 Sea-Sons LLC) and Thomas J Mazzarisi (M10 Ventures LLC). In consideration for this
termination both Directors agreed to resign from various positions including their Directorships at Curzon
Energy PLC, and to release the Company from all claims for other consideration they may have had. In
exchange for execution of this agreement, the Company agreed to allow them to subscribe for the
purchase of 1,500,000 ordinary shares, with each third of this total available at prices from £0.10 per
share, £0.15 per share and £0.20 per share.
No payments were made for loss of office during the year.
Other Matters
The Company does not currently have any annual or long-term incentive schemes in place for any of the
Directors and as such there are no disclosures in this respect.
The performance of the Remuneration Committee is yet to be assessed given the short time frame that it
has been operational.
No performance graph has been included here as the Company is in the early stages of its business
development.
Signed
John McGoldrick
Chairman of the Remuneration Committee
29 April 2019
16
Curzon Energy Plc
Annual Report 2018
Statement of Directors’ Responsibilities in respect of the Strategic Report, the
Directors’ Report and the Financial Statements
The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that
law they have elected to prepare the financial statements in accordance with IFRSs as adopted by the
EU and applicable law.
Under company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company
for that period. In preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
•
state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume 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
Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
•
•
the financial statements, prepared in accordance with International Financial Reporting Standards as
adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or
loss of the company;
the Directors report includes a fair review of the development and performance of the business and
the position of the company, together with a description of the principal risks and uncertainties that
they face.
By Order of the Board
Scott Kaintz, Director
29 April 2019
17
Curzon Energy Plc
Annual Report 2018
Independent auditor’s report to the members of Curzon Energy Plc
Opinion
We have audited the consolidated financial statements of Curzon Energy Plc and its subsidiaries (the
“Group”) for the year ended 31 December 2018 which comprise the consolidated statement of
comprehensive income, the consolidated and company statements of financial position, the consolidated
and company statements of cash flows, the consolidated and company statements of changes in equity
and notes to the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion:
•
the financial statements give a true and fair view of the state of the group’s and company’s affairs
as at 31 December 2018 and of its loss for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards as
•
•
adopted by the European Union;
the company financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union 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
Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2 to the financial statements, which details the factors the company has
considered when assessing the going concern position. As detailed in note 2, the uncertainty surrounding
the availability of funds to finance ongoing working capital requirements indicates the existence of a
material uncertainty that may cast significant doubt on the company’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material
if it could reasonably be expected to change the economic decisions of a user of the financial statements.
We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements
identified.
Based on our professional judgement, we determined overall materiality for the financial statements as a
whole to be $55,000, based on 2% of gross assets.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for
the audit of the financial statements. Performance materiality is set based on the audit materiality as
adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit
area having regard to the internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for
related party transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £3,000. Errors below
that threshold would also be reported to it if, in our opinion as auditor, disclosure was required on
qualitative grounds.
18
Curzon Energy Plc
Overview of the scope of our audit
Annual Report 2018
There are two components of the Group, Curzon Energy Plc as an entity and the US Group headed by
Coos Bay Energy LLC. The audit of Curzon Energy Plc was conducted from the UK. The accounting
records were provided to us by management. The company engaged a US firm to undertake the audit
work on the US group. The specified audit procedures were performed under our direction. We issued
instructions to the US firm that detailed the significant risks to be addressed through the audit procedures
and indicated the information we required to be reported. We reviewed their working papers and
discussed key findings.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified. These matters included those which
had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter
How the scope of our audit addressed the key audit
matter
Valuation of Intangible assets
We
reviewed management’s assessment which
concluded that no further impairment charge was required.
The group’s primary focus is on exploration
activities in the Coos Bay Basin. The
exploration assets at 31 December 2018
totalled $2.6m and an impairment of $0.6m
was recognised in the year in relation to
unsuccessful exploration costs capitalised in
the period.
impairment
risk
the
recognised we
Given
the
considered
residual
intangible assets relating to the Coos Bay
Basin was impaired.
that
the
In considering this assessment we reviewed the following
sources of evidence:
• The primary lease agreement in place supporting the
company’s right of extraction;
• The Competent Persons Report (CPR) that formed
the basis of the valuation;
• Board minutes, budgets and other operational plans
relating to the commercial appraisal of the asset;
• Compared the valuation methodology to the prior
year’s approach and the independent third party
valuation commissioned in 2017;
• Assessed the reasonability of the inputs and key
underlying assumptions, challenging management’s
inputs and assessing the impact of independently
derived inputs on the valuation model;
• Discussed plans and intentions with management.
We also considered
disclosure.
the appropriateness of
the
Key observations
We reviewed the valuation methodology and concur that
it is consistent with that used in prior years. We assessed
the key inputs and assumptions used in the valuation
model and consider them to be reasonable.
19
Curzon Energy Plc
Annual Report 2018
Our audit procedures in relation to this matter were designed in the context of our audit opinion as a
whole. They were not designed to enable us to express an opinion on these matters individually and we
express no such opinion.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion based on the work undertaken in the course of our audit
•
•
the information given in the strategic report and the directors' report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
the directors’ report and strategic report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report
or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
• adequate accounting records have not been kept by the company, or returns adequate for our
audit have not been received from branches not visited by us; or
•
•
the financial statements and the part of the directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 17, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
20
Curzon Energy Plc
Annual Report 2018
In preparing the financial statements, the directors are responsible for assessing the 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 Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
We designed our audit approach to be capable of detecting irregularities, including fraud. In particular:
We gained an understanding of the legal and regulatory framework applicable to the Group and
considered the risk of acts by the Group which were contrary to applicable laws and regulations, including
fraud.
We designed audit procedures to respond to the risk, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment
Our tests included, but were not limited to: review of the financial statement disclosures to underlying
supporting documentation and enquiries of management. There are inherent limitations in the audit
procedures described above and the further removed non-compliance with laws and regulations is from
the events and transactions reflected in the financial statements, the less likely we would become aware
of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits
we also addressed the risk of management override of internal controls, including testing journals and
evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.
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.
Other matters which we are required to address
We were appointed by the Board on 26 March 2019 to audit the financial statements for the year ended
31 December 2018. Our total uninterrupted period of engagement is 3 years, covering the period ended
31 December 2016 to 31 December 2018.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company and
we remain independent of the group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
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.
Matthew Stallabrass
Senior Statutory Auditor
For and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
29 April 2019
21
Curzon Energy Plc
Annual Report 2018
Consolidated statement of comprehensive income
for the year ended 31 December 2018
Note
6
7
10
4
8
Well field expenses
Administrative expenses
Loss from operations
Finance expense, net
Impairment of exploration and evaluation
assets
Other income
Loss before taxation
Income tax expense
Loss for the year attributable to
equity holders of the parent company
Other comprehensive income/(expense)
Gain/(loss) on translation of parent net assets
and results from functional currency into
presentation currency
Total comprehensive loss for the year
2018
US$
2017
US$
-
(1,363,949)
(293,867)
(1,662,619)
(1,363,949)
(14,443)
(1,956,486)
(102,288)
(575,316)
-
-
225,393
(1,953,708)
-
(1,833,381)
-
(1,953,708)
(1,833,381)
(70,245)
44,624
(2,023,953)
(1,788,757)
Loss per share
Basic and diluted, US$
9
(0.03)
(0.03)
The notes on pages 26 to 58 form part of these financial statements
22
Curzon Energy Plc
Consolidated statements of financial position
as at 31 December 2018
Annual Report 2018
Note
2018
US$
2017
US$
10
12
13
14
15
16
17
Assets
Non-current assets
Intangible assets
Restricted cash
Total non-current assets
Current assets
Prepayments and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Total current liabilities
Total liabilities
Capital and reserves attributable to
shareholders
Share capital
Share premium
Share-based payments reserve
Warrants reserve
Merger reserve
Foreign currency translation reserve
Accumulated losses
Total capital and reserves
Total equity and liabilities
2,559,000
125,000
2,684,000
2,559,000
125,440
2,684,440
36,157
125,621
161,778
2,845,778
148,616
1,595,035
1,743,651
4,428,091
506,894
213,812
720,706
463,413
578,599
1,042,012
720,706
1,042,012
1,024,036
3,563,122
454,026
191,011
31,212,041
(63,774)
(34,255,390)
2,125,072
964,575
3,199,004
114,659
191,011
31,212,041
6,471
(32,301,682)
3,386,079
2,845,778
4,428,091
The financial statements were approved and authorised for issue by the Board of Directors on 29 April
2019 and were signed on its behalf by:
Scott Kaintz
Director
The notes on pages 26 to 58 form part of these financial statements.
23
Curzon Energy Plc
Consolidated statements of changes in equity
Annual Report 2018
Equity as at 1 January
2017
Loss for the year
Other comprehensive
income for the year
Total comprehensive
loss for the year
Issue of shares
Share issue costs
Issue of share warrants
Issue of share options
At 31 December 2017
Loss for the year
Other comprehensive
income for the year
Total comprehensive
loss for the year
Issue of shares
Share issue costs
Issue of share options
At 31 December 2018
Other Reserves
Share capital
US$
Share
premium
US$
Other
reserves
US$
Accumulated
losses
US$
Total
US$
639,925
763,854
31,173,888
(30,468,301)
2,109,366
-
-
-
324,650
-
-
-
964,575
-
-
-
-
(1,833,381)
(1,833,381)
44,624
-
44,624
-
2,921,855
(486,705)
-
-
3,199,004
-
44,624
-
-
191,011
114,659
31,524,182
-
(1,833,381)
-
-
-
-
(32,301,682)
(1,953,708)
(1,788,757)
3,245,505
(486,705)
191,011
114,659
3,386,079
(1,953,708)
-
-
(70,245)
-
(70,245)
-
59,461
-
-
1,024,036
-
416,223
(52,105)
-
3,563,122
(70,245)
-
-
339,367
31,793,304
(1,953,708)
-
-
-
(34,255,390)
(2,023,953)
475,684
(52,105)
339,367
2,125,072
Merger
reserve
US$
Share-based
payments
reserve
US$
Warrants
reserve
US$
Foreign
currency
translation
reserve
US$
Total Other
reserves
US$
Equity as at 1 January
2017
Loss for the year
Other comprehensive
income for the year
Total comprehensive
loss for the year
Issue of share warrants
Issue of share options
At 31 December 2017
Loss for the year
Other comprehensive
loss for the year
Total comprehensive
loss for the year
Issue of share options
At 31 December 2018
31,212,041
-
-
-
-
-
31,212,041
-
-
-
-
-
-
-
-
-
114,659
114,659
-
-
191,011
-
191,011
-
(38,153)
-
31,173,888
-
44,624
44,624
44,624
-
-
6,471
-
44,624
191,011
114,659
31,524,182
-
-
-
-
(70,245)
(70,245)
-
-
31,212,041
-
339,367
454,026
-
-
191,011
(70,245)
-
(63,774)
(70,245)
339,367
31,793,304
24
Curzon Energy Plc
Consolidated statement of cash flows
Annual Report 2018
Cash flow from operating activities
Loss before taxation
Adjustments for:
Finance cost, net
Income from payable write off
Share-based payments charge
Impairment of exploration assets
Unrealised foreign exchange movements
Operating cashflows before working capital changes
Changes in working capital:
(Decrease)/increase in payables
Decrease/(increase) in receivables
Net cash used in operating activities
Investing activities
Capitalised exploration costs
Net cash outflow from investing activities
Financing activities
Issue of ordinary shares
Costs of share issue
Proceeds from new borrowings
Net cash flow from financing activities
Notes
2018
US$
2017
US$
7
18
(1,953,708)
(1,833,381)
42,321
-
339,367
575,316
(27,878)
(1,024,582)
86,473
(225,393)
111,367
-
50,184
(1,810,750)
(22,541)
112,461
(934,662)
66,576
(118,542)
(1,862,716)
(575,316)
(575,316)
-
-
17
16
-
(52,105)
100,000
47,895
3,087,266
(295,694)
250,000
3,041,572
Net (Decrease)/increase in cash and cash equivalents in
the period
(1,462,083)
1,178,856
Cash and cash equivalents at the beginning of the period
Restricted cash held on deposits
Total cash and cash equivalents at the beginning of the
period, including restricted cash
12
1,595,035
125,440
370,722
125,315
1,720,475
496,037
Effect of the translation of cash balances into presentation
currency
(Charge)/Interest on restricted cash
(7,331)
(440)
45,457
125
Cash and cash equivalents at the end of the period
Restricted cash held on deposits
Total cash and cash equivalents at the end of the period,
including restricted cash
12
125,621
125,000
1,595,035
125,440
250,621
1,720,475
25
Curzon Energy Plc
Annual Report 2018
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
1.
General information
The Company is incorporated and registered in England and Wales as a public limited company. The
Company’s registered number is 09976843 and its registered office is at Kemp House, 152 City Road,
London EC1V 2NX. On 4 October 2017, the Company’s shares were admitted to the Official List (by way
of Standard Listing) and to trading on the London Stock Exchange’s Main Market.
With effect from admission, the Company has been subject to the Listing Rules and the Disclosure
Guidance and Transparency Rules (and the resulting jurisdiction of the UK Listing Authority) to the extent
such rules apply to companies with a Standard Listing pursuant to Chapter 14 of the Listing Rules.
The principal activity of the Company is that of a holding company for its subsidiaries, as well as
performing all administrative, corporate finance, strategic and governance functions of the Group. The
Company’s investments comprise of subsidiaries operating in the natural gas sector.
The entire share capital of Coos Bay Energy, LLC (Coos Bay) was conditional on Admission, acquired by
the Company pursuant to a membership interest purchase agreement dated 20 May 2017 between the
Company, Coos Bay and the members of Coos Bay. At the time of its acquisition by the Company, Coos
Bay consisted of Coos Bay Energy, LLC and its wholly owned US Group as specified below. The
Company, Coos Bay Energy, LLC and the US Group as specified below together are referred to as the
Curzon Group. Coos Bay Energy, LLC is a limited liability corporation incorporated in Nevada, USA whose
registered office is 1370 Crowley Avenue SE, Portland, Oregon 97302, USA.
The US Group at the date of its acquisition by Coos Bay Energy, LLC consisted of Westport Energy
Acquisition, Inc. and its wholly-owned subsidiary, Westport Energy, LLC (together, the “US Group”).
Westport Energy Acquisition, Inc., was incorporated in May 2010 in Delaware, USA. Its registered office
is located at 100 Overlook Center, 2nd Floor, Princeton Junction, NJ 08540, USA.
Westport Energy, LLC was incorporated in December 2008 in Delaware, USA. Its registered office is
located at 100 Overlook Center, 2nd Floor, Princeton Junction, NJ 08540, USA.
The principal business of the US Group is the exploration for natural gas in the United States. The US
Group holds leases to approximately 45,370 acres of prospective coal bed methane (“CBM”) lands in the
Coos Bay Basin.
As a result of Coos Bay Energy, LLC acquisition, the Group owns certain CBM and related assets, which
it acquired on 4 November 2016 by acquiring the US Group from Westport Energy Holdings Inc., a publicly
held company trading on the OTC Pink Market. Coos Bay acquired the US Group pursuant to a
foreclosure agreement dated 4 November 2016 between Coos Bay, Westport Energy Holdings, Inc., the
US Group and the three creditors of Westport Energy Holdings Inc. (which at the time of the foreclosure
was the parent company of the US Group). Pursuant to the terms of the foreclosure agreement, all
outstanding debt and security instruments of Westport Energy Holdings, Inc., which was secured by all of
the assets of the US Group, was terminated, along with the creditors’ related security interests in the
assets of the US Group. In addition, outstanding royalty agreements with Queensbury, Inc. and YA Global
Investments Limited were also terminated. YA Global Investments L.P. was the major creditor and held a
75% interest in Coos Bay prior to the Acquisition. YA Global Investments L.P. now holds a majority interest
in the Coos Bay and 44.72% interest in the Company.
Prior to the acquisition of the US Group by Coos Bay, the US Group was wholly-owned by Westport
Energy Holdings Inc., which had acquired the Oregon CBM business, on 17 August 2010 from New
Earthshell Corporation, a corporation formed in Delaware in October 2008 to hold title to the CBM assets
through Westport Energy LLC. The parent company of New Earthshell Corporation was YA Global
26
Curzon Energy Plc
Annual Report 2018
Investments L.P. that had foreclosed on, and took title to, those Oregon CBM assets from Torrent Energy
on 26 November 2008.
2.
Accounting policies
The principal accounting policies adopted are set out below.
The Group Financial statements are presented in US Dollars as the entirety of the Company’s operations
are located in the United States.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting
Standards and IFRIC interpretations as endorsed by the EU (“IFRS”) and the requirements of the
Companies Act applicable to companies reporting under IFRS.
The financial statements are prepared on a going concern basis and under the historical cost convention.
The preparation of the Group financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires the Directors to exercise their judgment in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgment and
complexity, or areas where assumptions and estimates are significant to the Group financial statements
are disclosed below.
Current assets and liabilities disclosed in the notes to the accounts are those expected to be settled in
less than one year.
a) New standards, interpretations and amendments effective from 1 January 2018
There were no new standards or interpretations effective for the first time for periods beginning on or after
1 January 2018 that had a significant effect on the Curzon Group’s financial statements. The Company
adopted IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers from 1
January 2018.
IFRS 9 “Financial Instruments” has replaced IAS 39 “Financial Instruments: Recognition and
Measurement”. The Company does not hold any equity investments other than investments in
subsidiaries. Financial assets, such as selected other receivables, that were previously carried at
amortised cost are now classified into category “Financial assets carried at amortised cost”. The Company
applied the expected credit loss model when calculating impairment losses on its financial assets
measured at amortised cost, which did not result in a material provision due to other receivables’ value
being insignificant.
IFRS 15 “Revenue from Contracts with Customers” – the Company is pre-revenue hence the adoption
had no impact on the reported results. Under IFRS 15 management expect gas revenue to be recognised
at the point the gas is transferred to the customers control, for example delivery into the customer's
pipeline.
b) New standards, interpretations and amendments not yet effective
At the date of authorisation of these financial statements, a number of standards and interpretations,
which have not been applied in these financial statements, were in issue but not yet effective for the year
presented.
The Directors do not expect that the adoption of these standards will have a material impact on the
financial information of the Group in future periods.
Adoption of IFRS 16 will result in the group recognising right of use of assets and lease liabilities for all
contracts that are, or contain, a lease. For leases currently classified as operating leases, under current
accounting requirements the group does not recognise related assets or liabilities, and instead spreads
27
Curzon Energy Plc
Annual Report 2018
the lease payments on a straight-line basis over the lease term, disclosing in its annual financial
statements the total commitment. Due to the fact that the Group currently only has short term (less than
12 months) operating leases, IFRS 16 will not have a material impact on the results or balance sheet of
the Group. All the exploration areas land lease agreements that the Company has for its areas of interest
are outside of IFRS 16 scope.
IFRIC 23 is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses,
unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. This
interpretation is unlikely to have a material effect of the reported results.
Basis of consolidation
The Company was incorporated on the 29th of January 2016. It acquired Coos Bay Energy, LLC on the
4th of October 2017. At the time of its acquisition by the Company, Coos Bay Energy, LLC consisted of
Coos Bay Energy, LLC and its wholly owned US Group. It is the Directors’ opinion that the Company at
the date of acquisition of Coos Bay Energy, LLC did not meet the definition of a business as defined by
IFRS 3 and therefore the acquisition is outside on the IFRS 3 scope.
Where a party to an acquisition fails to satisfy the definition of a business, as defined by IFRS 3,
management have decided to adopt a “merger accounting” method of consolidation as the most relevant
method to be used.
The Group consistently applies it to all similar transactions in the following way:
- the acquired assets and liabilities are recorded at their existing carrying values rather than at fair value;
- no goodwill is recorded;
- all intra-group transactions, balances and unrealised gains and losses on transactions are eliminated
from the beginning of the first comparative period or inception, whichever is earlier;
- comparative periods are restated from the beginning of the earliest comparative period presented based
on the assumption that the companies have always been together;
- all the pre-acquisition accumulated losses of the legal acquirer are assumed by the Group as if the
companies have always been together;
- all the share capital and membership capital contributions of all the companies included into the legal
acquiree sub-group less the Company’s cost of investment into these companies are included into the
merger reserve; and
- the Company’s called up share capital is restated at the preceding reporting date to reflect the value of
the new shares that would have been issued to acquire the merged company had the merger taken place
at the first day of the comparative period. Where new shares have been issued during the current period
that increased net assets (other than as consideration for the merger), these are recorded from their actual
date of issue and are not included in the comparative statement of financial position.
Going concern
The Group financial statements have been prepared on the going concern basis, which assumes that the
Group will continue to be able to meet its liabilities as they fall due for the foreseeable future. The
operations are currently being financed by funds raised from a £95,000 equity placing completed on 1
March 2019 (the “Equity Placing”) and proceeds from a $1,000,000 credit facility provided from a company
related to the largest shareholder that provides the Group up to $500,000 minimum funding (the “Credit
Facility Minimum Funding”) and an additional $500,000 at the discretion of the lender. At year-end
$100,000 had currently been drawn down on this facility leaving a balance of $900,000 available. After
the year-end period, the Company has on 16 April 2019 amended the existing facility such that all
outstanding amounts issued and any future tranches drawn down now fall due on the last business day
of October 2020. The Group believes that, based on current projected operational plans, the proceeds
28
Curzon Energy Plc
Annual Report 2018
from the Equity Placement and the Credit Facility Minimum Funding are sufficient for the Group to operate
for a period of 12 months from the date of these financial statements.
The Group held cash balances of $125,621 as at 31 December 2018 and has funding plans in place for
further capital to meet its planned activities.
The directors note that the company will need additional funding to continue operations for the foreseeable
future and this means there is a material uncertainty as to the group’s ability to continue as a going
concern, however the Directors are confident that the Group will be able to raise, as required, sufficient
cash or reduce its commitments to enable it to continue its operations, including the pursuit of future
exploration opportunities, and to continue to meet, as and when they fall due, its liabilities for at least the
next twelve months from the date of approval of the Group financial statements. The Group financial
statements have, therefore, been prepared on the going concern basis.
Functional currency
Functional and presentation currency
The individual financial information of each Group entity is measured in the currency of the primary
economic environment in which the entity operates (its functional currency). The Company’s functional
currency is UK Pound Sterling (£). All other companies, belonging to the Curzon Group, have US Dollar
as their functional currency. The Group financial statements are presented in US Dollars ($).
Transactions and balances
Transactions in foreign currencies are converted into the respective functional currencies on initial
recognition, using the exchange rates approximating those ruling at the transaction dates. Monetary
assets and liabilities at the end of the reporting period are translated at the rates ruling as of that date.
Non-monetary assets and liabilities are translated using exchange rates that existed when the values
were determined. All exchange differences are recognised in profit or loss.
On consolidation, the assets and liabilities of the Group’s Pound Sterling operations are translated into
the Group’s presentational currency (US Dollar) at exchange rates prevailing at the reporting date. Income
and expense items are translated at the average exchange rates for the period unless exchange rates
have fluctuated significantly during the year, in which case the exchange rate at the date of the transaction
is used. All exchange differences arising, if any, are recognised as other comprehensive income and are
transferred to the Group’s foreign currency translation reserve.
Rates applied in these financial statements:
Closing USD/GBP rate at 31 December
Average USD/GBP rate for the year
2018
2017
1.2690
1.3436
1.3491
1.2889
Oil and gas exploration and evaluation expenditure
Exploration and evaluation costs incurred or acquired on the acquisition of a subsidiary are accumulated
in respect of each identifiable project area. Payments to acquire the legal right to explore, together with
the directly related costs of technical services and studies, seismic acquisition, exploratory drilling and
testing are capitalised as intangible E&E assets. These costs are only carried forward to the extent that
they are expected to be recouped through the successful development of the area or where activities in
the area have not yet reached a stage which permits reasonable assessment of the existence of
economically recoverable reserves (the “successful efforts’’ method).
Under the successful efforts method of accounting, all licence acquisition, exploration and appraisal costs
are initially capitalised in well, field or specific exploration cost centres as appropriate, pending
determination. Expenditure incurred during the various exploration and appraisal phases is then written
29
Curzon Energy Plc
Annual Report 2018
off unless commercial reserves have been established or the determination process has not been
completed.
Tangible assets used in E&E activities (such as the Group’s drilling rigs, seismic equipment and other
property, plant and equipment used by the Company’s exploration function) are classified as property,
plant and equipment. However, to the extent that such a tangible asset is consumed in developing an
intangible E&E asset, the amount reflecting that consumption is recorded as part of the cost of the
intangible asset. Such intangible costs include directly attributable overheads, including the depreciation
of property, plant and equipment utilised in E&E activities, together with the cost of other materials
consumed during the exploration and evaluation phases.
E&E costs are not amortised prior to the conclusion of appraisal activities. The properties are currently
unproved, and therefore capitalised costs are not amortised, but subject to impairment testing.
Other costs are written off unless commercial reserves have been established or the determination
process has not been completed. Accumulated costs in relation to an abandoned area are written off in
full against profit in the year in which the decision to abandon the area is made. When production
commences the accumulated costs for the relevant area of interest are transferred from intangible assets
to tangible assets as “Developed Oil and Gas Assets” and amortised over the life of the area according
to the rate of depletion of the economically recoverable costs. As no properties have been classified as
proved, development activities have not commenced.
Impairment of oil and gas exploration and evaluation assets
The carrying value of unevaluated areas is assessed when there has been an indication that impairment
in value may have occurred. The impairment of unevaluated prospects is assessed based on the
Directors’ intention with regard to future exploration and development of individual significant areas and
the ability to obtain funds to finance such exploration and development.
Decommissioning costs
Where a material liability for the removal of production facilities and site restoration at the end of the field
life exists, a provision for decommissioning is made. The amount recognised is the present value of
estimated future expenditure determined in accordance with local conditions and requirements. An asset
of an amount equivalent to the provision is also created and depreciated on a unit of production basis.
Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and
the associated asset. As at 31 December 2017 and 31 December 2018, no provisions were deemed
necessary.
Impairment
Impairment of financial assets
All financial assets are assessed at the end of each reporting period as to whether there is any objective
evidence of impairment as a result of one or more events having an impact on the estimated future cash
flows of the asset. For an equity instrument, a significant or prolonged decline in the fair value below its
cost is considered to be objective evidence of impairment.
An impairment loss in respect of financial assets carried at amortised cost is recognised in profit or loss
and is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the financial asset’s original effective interest rate.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the previously recognised
impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial
30
Curzon Energy Plc
Annual Report 2018
asset at the date the impairment is reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
Impairment of non-financial assets
The carrying values of assets, other than those to which IAS 36 “Impairment of Assets” does not apply,
are reviewed at the end of each reporting period for impairment when there is an indication that the assets
might be impaired. Impairment is measured by comparing the carrying values of the assets with their
recoverable amounts. The recoverable amount of the assets is the higher of the assets' fair value less
costs to sell and their value-in-use, which is measured by reference to discounted future cash flow.
An impairment loss is recognised in profit or loss immediately.
When there is a change in the estimates used to determine the recoverable amount, a subsequent
increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss
and is recognised to the extent of the carrying amount of the asset that would have been determined (net
of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in
profit or loss immediately, unless the asset is carried at its revalued amount, in which case the reversal
of the impairment loss is treated as a revaluation increase.
Financial instruments
Financial instruments are recognised in the statements of financial position when the Group has become
a party to the contractual provisions of the instruments.
Financial assets
The Group classifies its financial assets as financial assets carried at amortised cost, cash and cash
equivalents and restricted cash.
Financial assets are derecognised when the contractual rights to receive cash flows from the financial
assets have expired or have been transferred and the Group has transferred substantially all the risks
and rewards of ownership. On de-recognition of a financial asset in its entirety, the difference between
the carrying amount and the sum of the consideration received and any cumulative gain or loss that had
been recognised in other comprehensive income is recognised in profit or loss.
Amortised cost
These assets incorporate such types of financial assets where the objective is to hold these assets in
order to collect contractual cash flows and the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus transaction costs that are directly attributable to
their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate
method, less provision for impairment. Impairment provisions receivables are recognised based on the
simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected
credit losses. During this process the probability of the non-payment of the receivables is assessed. This
probability is then multiplied by the amount of the expected loss arising from default to determine the
lifetime expected credit loss for the receivables. On confirmation that the receivable will not be collectable,
the gross carrying value of the asset is written off against the associated provision.
Impairment provisions for receivables from related parties and loans to related parties are recognised
based on a forward-looking expected credit loss model. The methodology used to determine the amount
of the provision is based on whether there has been a significant increase in credit risk since initial
recognition of the financial asset. For those 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.
The Group's financial assets measured at amortised cost comprise other receivables and cash and cash
equivalents in the consolidated statement of financial position.
31
Curzon Energy Plc
Cash and cash equivalents
Annual Report 2018
Cash and cash equivalents comprise cash in hand, bank balances, bank overdrafts, deposits with financial
institutions and short-term, highly liquid investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
Restricted cash
Restricted cash are funds held as a collateral related to stand-by letters of credit related to the Group’s
oil and gas properties. Such deposits are classified as non-current assets and are not classified as part
of cash and cash equivalents as these deposits are not accessible by the Company for unrestricted use
and are not accessible for more than 3 months. More details on the Group’s restricted cash are given in
the note 12.
Financial liabilities
Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the
financial instrument.
Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified
as a liability are reported as an expense or income. Distributions to holders of financial instruments
classified as equity are charged directly to equity.
All financial liabilities are recognised initially at fair value plus directly attributable transaction costs and
subsequently measured at amortised cost using the effective interest method other than those categorised
as fair value through the Statement of Comprehensive Income.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or
expires. When an existing financial liability is replaced by another from the same party on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a de-recognition of the original liability and the recognition of a new liability, and
the difference in the respective carrying amounts is recognised in the income statement.
Financial liabilities include the following items:
- Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to
the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost
using the effective interest rate method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability carried in the consolidated statement of
financial position. For the purposes of each financial liability, interest expense includes initial transaction
costs and any premium payable on redemption, as well as any interest or coupon payable while the liability
is outstanding.
- Liability components of convertible loan notes are measured as described further below.
- Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest method.
Convertible debt
The proceeds received on issue of the Group's convertible debt are allocated into their liability and equity
components. The amount initially attributed to the debt component equals the discounted cash flows using
a market rate of interest that would be payable on a similar debt instrument that does not include an option
to convert. Subsequently, the debt component is accounted for as a financial liability measured at
amortised cost until extinguished on conversion or maturity of the bond. The remainder of the proceeds
32
Curzon Energy Plc
Annual Report 2018
is allocated to the conversion option and is recognised as a separate equity component within
shareholders' equity, net of income tax effects.
Borrowing costs
Borrowing costs are capitalised, net of interest received on cash drawn down yet to be expended only
when they are directly attributable to the acquisition, contribution or production of an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale.
Equity instruments
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
are shown in Share Premium account as a deduction, net of tax, from proceeds. Dividends on ordinary
shares are recognised as liabilities when approved for distribution.
Warrants
Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s
consolidated balance sheets and no further adjustments to their valuation are made. Management
estimates the fair value of these liabilities using option pricing models and assumptions that are based on
the individual characteristics of the warrants or instruments on the valuation date, as well as assumptions
for future financings, expected volatility, expected life, yield, and risk-free interest rate.
Taxation
Income tax for each reporting period comprises current and deferred tax.
Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year
and is measured using the tax rates that have been enacted or substantively enacted at the end of the
reporting period.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the Group financial statements.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and
unused tax credits to the extent that it is probable that future taxable profits will be available against which
the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The
carrying amounts of deferred tax assets are reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or
part of the deferred tax assets to be utilised.
Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from
goodwill or excess of the Group’s interest in the net fair value of the acquired company’s identifiable
assets, liabilities and contingent liabilities over the business combination costs or from the initial
recognition of an asset or liability in a transaction which is not a business combination and at the time of
the transaction, affects neither accounting profit nor taxable profit.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
when the asset is realised or the liability is settled, based on the tax rates that have been enacted or
substantively enacted at the end of the reporting period.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when the deferred income taxes relate to the same taxation
authority.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent
that it has become probable that future taxable profit will allow deferred tax assets to be recovered.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred
33
Curzon Energy Plc
Annual Report 2018
tax items are recognised in correlation to the underlying transactions either in other comprehensive
income or directly in equity.
Deferred tax arising from a business combination is included in the resulting goodwill or excess of the
Group’s interest in the net fair value of the acquired company’s identifiable assets, liabilities and
contingent liabilities over the business combination costs.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the
arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific
asset or assets or the arrangement conveys a right to use the asset.
The Group holds leases to approximately 45,370 acres of prospective coalbed methane lands in the Coos
Bay Basin. These leases are outside of IFRS16 scope. The annual rental payments under these operating
leases are recognised as an expense on a straight-line basis over the lease term.
Employee benefits
Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in
the period in which the associated services are rendered by employees of the Group.
Post-employment benefits
The Group does not currently make provision for post-employment benefits by way of pension plans or
similar arrangements.
Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Group has a present or constructive obligation as a result of past
events, when it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation, and when a reliable estimate of the amount can be made. Provisions are reviewed
at the end of each financial reporting period and adjusted to reflect the current best estimate. Where the
effect of the time value of money is material, the provision is the present value of the estimated
expenditure required to settle the obligation.
A contingent liability is a possible obligation that arises from past events and whose existence will only be
confirmed by the occurrence of one or more uncertain future events not wholly within the control of the
Group. It can also be a present obligation arising from past events that is not recognised because it is not
probable that an outflow of economic resources will be required, or the amount of obligation cannot be
measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a
change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as
a provision.
A contingent asset is a probable asset that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control
of the Group. The Group does not recognise contingent assets but discloses its existence where inflows
of economic benefits are probable, but not virtually certain.
Share-based payment arrangements
Equity-settled share-based payments to employees and others providing similar services are measured
at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair
value of equity-settled share-based transactions are set out in note 18 to the Group financial statements.
The fair vale determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Directors’ estimate of equity instruments that will
34
Curzon Energy Plc
Annual Report 2018
eventually vest, with a corresponding increase in equity. Where the conditions are non-vesting, the
expense and equity reserve arising from share based payment transactions is recognised in full
immediately on grant.
At the end of each reporting period, the Directors revised their estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in
profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to other reserves.
Operating segments
An operating segment is a component of the Group that engages in business activities from which it may
earn revenues and incur expenses. The results of an operating segment are reviewed regularly by the
chief operating decision maker to make decisions about resources to be allocated to the segment and
assess its performance, and for which discrete financial information is available.
Summary of critical accounting estimates and judgements
The preparation of the Group financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires the Directors to exercise their judgement in the process of
applying the accounting policies, which are detailed above. These judgements are continually evaluated
by the Directors and management and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The key estimates and underlying assumptions concerning the future and other key sources of estimation
uncertainty at the Statement of Financial Position date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial period are reviewed
on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate
is revised if the revision affects only that period or in the period of the revision and future periods if the
revision affects both current and future periods.
The prime areas involving a higher degree of judgement or complexity, where assumptions and estimates
are significant to the financial statements, are as follows:
Going concern
The Group financial statements have been prepared on a going concern basis as the Directors have
assessed the Group’s ability to continue in operational existence for the foreseeable future. The
operations are currently being financed by third party loans and funds raised from an equity placing
completed on 1 March 2019. See Going Concern section on page 28 for more details.
The Group is reliant on the continuing support from its shareholders and the expected support of future
shareholders.
The Group financial statements do not include the adjustments that would result if the Group were not to
continue as a going concern. See Going Concern section on page 28 for more details.
Basis of consolidation
At 31 December 2018 and 31 December 2017 the group results include the results of Curzon Energy Plc,
Coos Bay Energy, LLC, Westport Energy Acquisitions, Inc. and Westport Energy, LLC.
Impairment of capitalised exploration and evaluation expenditure
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest
the carrying value may exceed its recoverable amount. During the year ended 31 December 2018, there
was sufficient data available to indicate that, although the development of additional wells is expected to
proceed, the previous carrying value of exploration and evaluation assets were unlikely to be completely
recovered from successful development or sales. Therefore, the Directors deemed that an impairment of
$575,316 was necessary as described in note10. No impairment was made for the year ended 31
35
Curzon Energy Plc
Annual Report 2018
Summary of critical accounting estimates and judgements continued
December 2017. As at 31 December 2017 the carrying value of the exploration and evaluation assets
was US$2,559,000.
Valuation of share options and warrants
The Group measures the cost of equity-settled transactions with employees by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value of share options is
determined using the Black-Scholes model. The model has its strengths and weaknesses and requires
six inputs as a minimum: 1. The share price; 2. The exercise price; 3. The risk free rate of return; 4. The
expected dividends or dividend yield; 5. The life of the option; and 6. The volatility of the expected return.
The first three inputs are normally, but not always, straightforward. The last three involve greater
judgement and have the greatest impact on the fair value. More details on how the volatility was
determined in the absence of the historical trading date are given in the note 18.
3.
Segmental analysis
IFRS 8 “Operating Segments” requires operating segments to be identified on the basis of internal reports
about components of the Group that are regularly reviewed by the chief operating decision maker (which
takes the form of the Directors) as defined in IFRS 8 “Operating Segments”, in order to allocate resources
to the segment and to assess its performance.
The Group’s business involves exploring for hydrocarbon liquids and gas. As at each of 31 December
2017 and 31 December 2018, the Directors consider there is one reportable operating segment
Accordingly, an analysis of segment profit or loss, segment assets, segment liabilities and other material
items has not been presented.
The Group operates in one geographic area, being the USA. All intangible assets and operating assets
and liabilities are located in the USA. The Group has not yet commenced production and therefore has
no revenue.
4.
Loss for the year before taxation
Loss before tax is stated after charging / (crediting):
Impairment of exploration and evaluation expenditure
Auditor’s remuneration:
-
-
fees payable to the Company’s auditor for the audit of
the consolidated and Company financial statements
fees payable to the Company’s auditor for other
services: corporate finance services
Share-based payments
Foreign currency translation loss/(gain)
Operating lease rentals:
- mineral rights (outside of IAS 17 and IFRS 16 scope)
2018
US$
575,316
2017
US$
-
25,500
58,000
-
148,223
339,367
(27,878)
111,367
36,794
40,289
63,409
36
Curzon Energy Plc
5.
Directors and staff
Annual Report 2018
There were no staff employed by the Group during the two years ended 31 December 2018. One director,
Mr Scott Kaintz, was employed by the Company since 5 November 2018.
Remuneration of key management personnel
Directors’ emoluments and benefits as follows:
2018
John McGoldrick
Scott Kaintz
Owen May
Brian James Kinane
Thomas Wagenhofer
Thomas Mazzarisi
Stephen Schoepfer
Total directors’
compensation
2017
John McGoldrick
Scott Kaintz
Owen May
Brian James Kinane
Thomas Wagenhofer
Thomas Mazzarisi
Stephen Schoepfer
Total directors’ compensation
Directors’
fees
US$
67,178
16,148
-
-
97,407
103,333
103,333
Social
security
costs
US$
-
1,968
-
-
-
-
-
Total cash-
compensation
US$
67,178
18,116
-
-
97,407
103,333
103,333
Share-based
Payments (options)
US$
37,149
-
-
74,891
149,828
38,750
38,750
Total
compensation
US$
104,327
18,116
-
74,891
247,235
142,083
142,083
387,399
1,968
389,367
339,368
728,735
Directors’
fees
US$
16,111
-
-
-
93,052
182,000
182,000
473,163
Social
security
costs
US$
-
-
-
-
-
-
-
-
Total cash-
compensation
US$
16,111
-
-
-
93,052
182,000
182,000
473,163
Share-based
Payments (options)
US$
20,250
-
-
30,366
60,751
-
-
111,367
Total
compensation
US$
36,361
-
-
30,366
153,803
182,000
182,000
584,530
The Directors’ emoluments are paid from Coos Bay Energy LLC and the Company.
In 2018, Stephen Schoepfer received US$103,333 (2017: US$182,000) of which US$103,333 (2017:
US$38,750) was paid to him through his service company 4 Sea-Sons LLC.
In 2018, Thomas Wagenhofer was paid all his fees of US$97,407 (2017: US$93,052) through his service
company Gate Energy Limited.
In 2018, Thomas Mazzarisi was paid all if his fees of US$103,333 (2017: US$182,000) through his service
company M10 Ventures LLC.
In 2018, John McGoldrick had through agreement with the Company agreed to defer payment of his
2018 director’s compensation, which at 31 December 2018 totalled £50,000 (US$67,178).
37
Curzon Energy Plc
6.
Administrative expenses
Staff costs
Directors’ salaries
Consultants
Employers NI
Professional services
Accounting, audit & taxation
Legal
Marketing
Other
Regulatory compliance
Travel
Office and Admin
General
IT related costs
Rent
Insurance
7.
Finance expense (net)
Foreign exchange loss/(gain)
Other interest received
Other interest paid
Interest on promissory notes
Annual Report 2018
2018
US$
2017
US$
726,767
584,530
64,965
1,968
98,356
68,655
57,422
31,202
130,830
41,614
64,165
2,379
41,552
34,074
-
-
223,515
256,144
59,199
70,988
127,790
57,736
136,649
2,625
65,106
78,337
1,363,949
1,662,619
2018
US$
2017
US$
(27,878)
36,794
-
-
42,321
14,443
(125)
16,138
49,481
102,288
38
Curzon Energy Plc
8.
Taxation
Annual Report 2018
The Group has made no provision for taxation as it has not yet generated any taxable income. A
reconciliation of income tax expense applicable to the loss before taxation at the statutory tax rate to the
income tax expense at the effective tax rate of the Group is as follows:
Loss before tax
UK corporation tax credit at 19.00% (2017: 19.25%)
Effect of non-deductible expense
Differences in overseas tax rates
Effect of tax benefit of losses carried forward
Current tax (credit)
2018
US$
2017
US$
(1,953,708)
(1,833,381)
(371,205)
(352,926)
77,384
21,438
(21,307)
(120,048)
315,127
451,535
-
-
As at 31 December 2018, the tax effects of temporary timing differences giving rise to deferred tax assets
was US$1,127,127 (2017: US$812,000).
A deferred tax asset in respect of these losses and temporary differences has not been established as
the Group has not yet generated any revenues and the Directors have therefore assessed the likelihood
of future profits being available to offset such deferred tax assets to be uncertain.
9.
Pro forma basic and diluted loss per share
The basic loss per share is derived by dividing the loss for the year attributable to ordinary shareholders
of the Company by the weighted average number of shares in issue.
Diluted loss per share is derived by dividing the loss for the year attributable to ordinary shareholders of
the Company by the weighted average number of shares in issue plus the weighted average number of
ordinary shares that would be issued on conversion of all dilutive potential ordinary shares into ordinary
shares.
The acquisition of Coos Bay Energy, LLC by Curzon Energy Plc was not within the scope of the IFRS 3
due to Curzon Energy Plc not meeting the definition of a business. This acquisition was accounted using
the principles of merger accounting as described in the accounting policy in note 2. The weighted average
number of shares for the purposes of loss per share calculation for reporting and comparative years were
adjusted as described below.
During the year ended 31 December 2017: 40,000,000 shares in Curzon Energy Plc were issued to Coos
Bay Energy, LLC previous owners as a consideration for the acquisition of Coos Bay Energy, LLC. These
new shares were included into the weighted average number for shares calculation as if they were in
issue from the first day of the first period presented in these financial statements, 1 January 2017. The 2
ordinary shares, that were issued by Curzon on incorporation, have also been included into the calculation
as if they were in issue since 1 January 2017.
During the year ended 31 December 2018, 4,425,616 shares in Curzon Energy Plc were issued to Mr
Barry Liben in satisfaction of the aggregate debt of £354,049.24 owed to him pursuant to a promissory
note entered into with the Company on 29 December 2016.
The new shares have been issued during the current and comparative periods that increased net assets
(other than as consideration for the Coos Bay acquisition in the comparative period, which was accounted
for using the principles of merger accounting). Such shares were included into the weighted average
number of shares calculation recorded from their actual date of issue and were not included in the
comparative weighted average number of shares.
39
Curzon Energy Plc
Annual Report 2018
The following reflects the loss and share data used in the basic and diluted loss per share computations:
Loss after tax (US$)
Weighted average number of ordinary shares of £0.01 in
issue
Effect of dilutive options and warrants
Weighted average number of ordinary shares of £0.01 in
issue inclusive of outstanding dilutive options and warrants
Loss per share - basic and fully diluted (US$)
2018
2017
(1,953,708)
(1,833,381)
74,449,821 54,095,138
-
-
74,449,821 54,095,138
0.03
0.03
Options and warrants with all conditions met at the end of each respective period:
Share options granted to employees - fully vested at the end
of the respective period
Warrants given to shareholders as a part of placing equity
instruments - fully vested at the end of the respective period
Total instruments fully vested
2018
Number
2017
Number
2,386,872
421,152
3,630,200
3,630,200
6,017,072
4,051,352
At 31 December 2018, the effect was anti-dilutive as it would lead to a further reduction of loss per share,
therefore they were not included into the diluted loss per share calculation.
Options and warrants with conditions not met at the end of the period, that could potentially dilute basic
EPS in the future, but were not included in the calculation of diluted EPS for the periods presented:
Share options granted to employees - not vested at the end of
the respective period
Warrants given to shareholders as a part of placing equity
instruments – conditions not all met
Total options and warrants with conditions not all met
Total number of instruments and potentially issuable
instruments (vested and not vested) not included into the fully
diluted EPS calculation
2018
Number
2017
Number
5,246,832
4,212,552
-
-
5,246,832
4,212,552
11,263,904
8,263,904
40
Curzon Energy Plc
10.
Intangible assets
Exploration and evaluation expenditure
Cost:
At the beginning of the year
Additions – exploration costs capitalised
At the end of the year
Impairment provision:
At the beginning of the year
Provision for the year
At end of the year
Net Book Value
Annual Report 2018
2018
US$
2017
US$
24,141,000 24,141,000
-
575,316
24,716,316 24,141,000
(21,582,000) (21,582,000)
-
(575,316)
(22,157,316) (21,582,000)
2,559,000
2,559,000
The oil and gas properties are currently unproven and ongoing exploration activities are planned and will
require additional significant expenditures. These exploration activities include formation stimulation and
production testing of wells to be drilled at the Coos Bay project. As the first phase of exploration and
development activities on the Coos Bay Project’s unproved properties are still in progress, an assessment
will be made upon completion of that phase as to whether a reclassification of a portion of the unproved
reserves to proven reserves should be made. Once properties have been classified as proven, they are
transferred from intangible assets to tangible assets as “Developed Oil and Gas Assets” and amortised
over the life of the area according to the rate of depletion of the economically recoverable costs.
Impairment
In accordance with IFRS 6 “Exploration and Evaluation of Mineral Resources”, the Directors have
assessed whether any indication of impairment exists in respect of these intangible assets as follows:
During the year ended 31 December 2018 the carrying value of exploration assets exceeded the fair value
and impairment in the amount of US$575,317 was recognised. This value represents the well rework and
stimulation efforts conducted during the course of 2018 that to date have not yielded meaningful gains in
flow rates and well performance. The view has thus been taken that this work may not result in future
recoverable economic value.
The fair value of the Coos Bay exploration assets was valued based upon a discounted cash flow using
management’s estimates, which are considered level 3 inputs. The key inputs were a discount rate of
10%, and a gas price of $3.90/mcf being the 2018 average Oregon Citygate gas price. Sensitivity analysis
was conducted on this valuation model in which discount rates and gas prices were varied and are
presented below.
Varied
Rates
Discount
8%
9%
11%
12%
Project NPV (US$ M)
8.194
Varied Gas Prices
+2%
Project NPV (US$ M)
11.809
Varied OPEX Costs
+2%
6.478
+1%
8.212
+1%
3.772
-1%
2.176
-1%
2.712
-2%
-.351
-2%
41
Curzon Energy Plc
Annual Report 2018
Project NPV (US$ M)
3.415
4.259
5.695
6.305
The analysis of these exploration assets was further supported by the contingent resources of the project,
which included 2C resources of 273.5 BCF in the Lower Coaledo and 28.1 BCF in the Upper Coaledo.
Also, consideration was given to the USA as a safe jurisdiction in which to operate, a multi-year track
record of Oregon Citygate prices being higher than that of industry standard Henry Hub prices, close
proximity to a 12 in regional pipeline with adequate takeaway capabilities and the over $22m of
infrastructure and related costs spent to date by the previous operators. Together this analysis gave the
Directors comfort that Coos Bay remains a viable exploration and development project going forward.
Environmental matters
The Group has established procedures for a continuing evaluation of its operations to identify potential
environmental exposures and to assure compliance with regulatory policies and procedures. The
Directors monitor these laws and regulations and periodically assesses the propriety of its operational
and accounting policies related to environmental issues. The nature of the Group’s business requires
routine day-to-day compliance with environmental laws and regulations. The Group has incurred no
material environmental investigation, compliance or remediation costs for each of the years ended 31
December 2017, and 31 December 2018. The Directors are unable to predict whether the Group’s future
operations will be materially affected by these laws and regulations. It is believed that legislation and
regulations relating to environmental protection will not materially affect the results of operations of the
Group.
11.
Subsidiary Undertakings
The Group has the following subsidiary undertakings:
Name
Country of
incorporation
Coos Bay Energy, LLC
Westport Energy
Acquisitions, Inc.
Westport Energy, LLC
USA
USA
USD
Issued capital
Membership
interests
Shares
Membership
interests
Proportion held
by Group
100%
100%
Activity
Holding company
Holding company
100%
Oil and gas exploration
All the above subsidiaries have same registered office with address 1001 SW 5th Avenue, Suite 1100,
Portland, OR 97204, USA.
12.
Restricted cash
Restricted cash includes funds held as a collateral to support stand-by letters of credit related to the
Group’s oil and gas properties. The letters of credit secure the Group’s reclamation obligations under the
leases and state law. The cash can be taken by Umpqua Bank in the event the letters of credit are drawn
on by the State of Oregon, Department of Geology & Mineral Industries (DOGAMI). The cash is held in
the form of a Certificate of Deposit.
13.
Prepayments and other receivables
VAT recoverable
Other debtors
2018
US$
2017
US$
23,213
12,944
114,260
34,356
42
Curzon Energy Plc
Annual Report 2018
36,157
148,616
The fair value of receivables and deposits approximates their carrying amount, as the impact of
discounting is not significant. The receivables are not impaired and are not past due.
14.
Cash and cash equivalents
For the purpose of the statements of financial position, cash and cash equivalents comprise the
following:
Cash in hand and at bank
15.
Trade and other payables
Trade and other payables
Accruals
Total financial liabilities, excluding loans and
borrowings, classified as financial liabilities measured at
amortised cost
Other payables - tax and social security payments
Total trade and other payables
16.
Borrowings
2018
US$
125,621
125,621
2017
US$
1,595,035
1,595,035
2018
US$
2017
US$
370,646
127,216
385,840
77,573
497,862
463,413
9,032
-
506,894
463,413
During the year ended 31 December 2018, the Coos Bay issued one short-term promissory notes totalling
US$100,000 (2017: issued two short-term promissory notes totalling US$250,000). Details of the notes
are disclosed in the table below:
Origination
date
Contractual
settlement
date
Note value in
original
currency
Note value,
US$
Annual
interest
rate
Status at 31
December
2018
Security
Cuart
Investments
PCC, Ltd.
YA Global
Bruce
Edwards
29 Dec 2016
extended to 31
Dec 2018
£300,000
$404,730
12% unsecured
Converted on
31 July 2018
3 Oct 2018
30 Oct 2019
$100,000
$100,000
10% unsecured Outstanding
1 Sep 2017
31 Dec 2018
$100,000
$100,000
15% unsecured Outstanding
No interim payments are required under the promissory notes, as the payment terms require the original
principal amount of each note, and all accrued interest thereon, to be paid in single lump payments on
the respective contractual settlement dates.
At 1 January
Received during the year
Interest accrued during the year
Exchange rate differences
Discharged during the year by issue of shares in Curzon
At 31 December
2018
US$
578,599
100,000
42,321
(31,424)
(475,684)
213,812
2017
US$
363,829
250,000
57,725
66,285
(159,240)
578,599
43
Curzon Energy Plc
Annual Report 2018
Reconciliation of liabilities arising from financing activities
Cash flows
Proceeds
from new
borrowings
Non cash flow
Forex
movement
31 Dec 2017
Non cash flow
Conversion
Non cash flow
Interest accrued
31 Dec
2018
Cuart Investments
PCC, Ltd.
YA Global
Bruce Edwards
Total liabilities
from financing
activities
473,667
-
104,932
-
(22,167)
(475,684)
100,000
-
(2,167)
(7,090)
-
-
24,184
2,600
15,537
-
100,433
113,379
578,599
100,000
(31,424)
(475,684)
42,321
213,812
17.
Share capital
Authorised share capital
As permitted by the Companies Act 2006, the Company does not have an authorised share capital.
Issued equity share capital
Issued and fully paid
Ordinary shares of £0.01 each (after share
split on 28 May 2017)
Ordinary shares of £0.01 each issued
during the year
2018
2017
Number
US$
Number
US$
72,594,700
964,575
72,594,700
964,575
4,425,616
59,460
-
-
Total ordinary shares of £0.01 each
77,020,316
1,024,036
72,594,700
964,575
The Company has one class of Ordinary shares which carry no right to fixed income.
At 1 January 2017 (Ordinary shares of £1 each)
Share split (a)
Issue of shares (b)
Issue of shares (c)
Issue of shares (d)
At 31 December 2017
Issue of shares (e)
At 31 December 2018
Number
81,297
Ordinary shares of £0.01
each, number
8,129,700
1,200,000
40,000,000
23,265,000
72,594,700
4,425,616
77,020,316
44
Curzon Energy Plc
(a)
Share split
Annual Report 2018
On 28 May 2017, the Company subdivided each Ordinary share of £1 each into 100 Ordinary
shares of £0.01 each. Following the subdivision, the aggregate number of Ordinary shares in
issue was 8,129,700.
(b)
Issue of shares
On 26 September 2017, the Company allotted and issued 1,200,000 Ordinary shares of £0.01
each in full satisfaction of all amounts owed under its US$150,000 short-term promissory note
with YA Global. The 1,200,000 Ordinary shares are subject to a one-year lock-in agreement.
(c)
Issue of shares
On 3 October 2017, the Company allotted and issued 40,000,000 Ordinary shares of £0.01 each
for a subscription price of £0.10 per Ordinary share.
(d)
Issue of shares
On 4 October 2017, the Company allotted and issued 23,265,000 Ordinary shares of £0.01 each
for a subscription price of £0.10 per Ordinary share.
(e)
Issue of shares
On 31 July 2018, the Company allotted and issued 4,425,616 Ordinary shares of £0.01 each at
£0.80 per Ordinary share on conversion of the Cuart loan as disclosed in note 16.
The ordinary shares carry the right to one vote per share at general meetings of the company and the
rights to share in any distribution of profits or returns of capital and to share in any residual assets available
for distribution in the event of a winding up.
18.
Share Based Payments
Employee share options
The Company established employee share option plans to enable the issue of options as part of the
remuneration of key management personnel and Directors to enable them to purchase Ordinary shares
in the Company. Under IFRS 2 “Share-based Payments”, the Company determines the fair value of the
options issued to Directors and employees as remuneration and recognises the amount as an expense
in the statement of income with a corresponding increase in equity.
At 31 December 2018, the Company had outstanding options to subscribe for Ordinary shares as follows:
Option exercise price
Number of
options granted
Vesting date
Expiry date
Fair value of
individual option
£0.10
£0.15
£0.10
£0.30
£0.15
£0.30
£0.10
£0.15
£0.20
Total options outstanding
at 31 December 2018
421,152
421,152
1,123,416
421,152
1,123,416
1,123,416
1,000,000
1,000,000
1,000,000
7,633,704
4 Oct 2017
4 Apr 2018
4 Oct 2018
4 Oct 2018
4 Oct 2019
4 Oct 2020
1 Mar 2019
1 Mar 2019
1 Mar 2019
4 Oct 2022
4 Oct 2022
4 Oct 2022
4 Oct 2022
4 Oct 2022
4 Oct 2022
31 May 2019
31 May 2019
31 May 2019
£0.074
£0.067
£0.074
£0.055
£0.067
£0.055
£0.028
£0.017
£0.012
45
Curzon Energy Plc
Outstanding at the beginning of the period
Granted during the period
Forfeited during the period
Exercised during the period
Lapsed during the period
Outstanding at the end of the period
Vested and exercisable at the end of the period
Annual Report 2018
2018
2017
Weighted
average
exercise
price
£
0.18
0.15
-
-
-
0.17
0.13
Number of
options
4,633,704
3,000,000
-
-
-
7,633,704
2,386,872
Number of
options
-
4,633,704
-
-
-
4,633,704
421,152
Weighted
average
exercise
price
£
-
0.18
-
-
-
0.18
0.10
During the financial year 3,000,000 (2017: 4,633,704) options were granted at an exercise price ranging
from £0.1 to £0.2. These options were granted to the former Directors to release all other liabilities arising
on the termination of their contract, the options granted in 2018 were valued based on the value of the
discharged liabilities, which arose on the termination of the former Directors’ contracts
The weighted average fair value of each option granted during the year was £0.019 (2017: £0.065).
The exercise price of options outstanding at 31 December 2018 ranged between £0.1 and £0.3 (2017:
ranged between £0.1 and £0.30). Their weighted average remaining contractual life was 2.45 years (2017:
4.76 years).
The weighted average share price (at the date of exercise) of options exercised during the year was nil
(2017: nil) as no options were exercised.
The following information is relevant in the determination of the fair value of the options granted during
the year under equity-settled share-based remuneration schemes:
Option pricing model used
Weighted average share price at grant date, £
Weighted average contractual life, years
Expected volatility, %
Expected dividend growth rate, %
Risk-free interest rate (5-year bond), %
Granted on 4 October
2017
Black-Scholes
0.105
5.00
90.91
0
0.802
Calculation of volatility involves significant judgement by the Directors due to the absence of the historical
trading data for the Company at the date of the grant. Volatility number for the options granted on 15
October 2018 was calculated based on the Company’s historical trading data. Volatility number of the
options granted on 4 October 2017 was estimated based on the range of 5-year month end volatilities of
10 similar size listed companies operating in Oil and Gas sector.
Share-based remuneration expense related to the share options granted during the reporting period and
part of the charge relating to the options granted in 2017 is included in the administration expenses line
in the consolidated income statement in the amount of $339,367 (2017: US$111,367).
Warrants
During the year ended 31 December 2018 no warrants were granted by the Company.
During the year ended 31 December 2017 the Company issued the following warrants to subscribe for
shares:
46
Curzon Energy Plc
Warrant exercise
price
£0.10
£0.125
Total granted during
the year
Number of
warrants
granted
130,200
1,500,000
3,630,200
All warrants granted vested on 4 October 2017.
Annual Report 2018
Vesting date
Expiry date
Fair value of
individual
option
4 Oct 2017
4 Oct 2017
4 Oct 2020
4 Oct 2020
£0.061
£0.056
On 4 October 2018, 2,000,000 warrants granted on the date of admission with exercise price of £0.15
expired.
The weighted average fair value of each warrant granted during the year was £nil (2017: £0.04).
The exercise price of warrants outstanding at 31 December 2018 ranged between £0.1 and £0.125 (2017:
ranged between £0.1 and £0.15). Their weighted average remaining contractual life was 0.65 years (2017:
1.65 years).
The weighted average share price (at the date of exercise) of warrants exercised during the year was nil
(2017: nil) as no warrants were exercised.
The following information is relevant in the determination of the fair value of the warrants granted during
the year ended 31 December 2017:
Warrant pricing model used
Weighted average share price at grant date, £
Weighted average contractual life, years
Expected volatility, %
Expected dividend growth rate, %
Risk-free interest rate (5 year bond), %
Granted on 4 October 2017
Black-Scholes
0.105
1 - 3
90.91
0
0.802
Calculation of volatility involves significant judgement by the Directors due to the absence of the historical
trading data for the Company at the date of the grant. Volatility number above was estimated based on
the range of 5-year month end volatilities of 10 similar sized listed companies operating in the Oil and
Gas sector.
The aggregate fair value related to the share warrants granted during the reporting period has been
allocated to share premium as share issue cost in the amount of US$nil (2017: US$191,011).
19.
Reserves
Share premium
The share premium account represents the excess of consideration received for shares issued above
their nominal value net of transaction costs.
Foreign currency translation reserve
The translation reserve represents the exchange gains and losses that have arisen from the retranslation
of overseas operations.
Retained earnings
Retained earnings represent the cumulative profit and loss net of distributions to owners.
47
Curzon Energy Plc
Annual Report 2018
Warrants reserve
The warrants reserve represents the cumulative fair value of the warrants, granted to the investors
together with placement shares, still outstanding and not exercised.
Share-based payment reserve
The share-based payment reserve represents the cumulative charge for options granted, still outstanding
and not exercised.
Merger reserve
The merger reserve represents the cumulative share capital and membership capital contributions of all
the companies included into the legal acquire sub-group less cost of investments into these legal
acquirees.
20.
Financial instruments – risk management
General objectives, policies and processes
The overall objective of the Directors is to set policies that seek to reduce risk as far as possible without
unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are
set out below.
The Directors review the Group’s monthly reports through which they assess the effectiveness of the
processes put in place and the appropriateness of the objectives and policies it sets.
Categories of financial assets and liabilities
The Group’s activities are exposed to a variety of market risk (including interest rate and currency risk)
and liquidity risk. The Group’s overall financial risk management policy focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on its financial performance.
The principal financial instruments used by the Group, from which financial instrument risk arises, are as
follows:
•
•
•
•
Other receivables;
cash and cash equivalents;
trade and other payables; and
borrowings.
Other receivables are initially measured at fair value and subsequently carried at amortised cost.
The carrying value of financial assets and financial liabilities maturing within the next 12 months
approximates their fair value due to the relatively short-term maturity of the financial instruments.
The Group had no financial assets or liabilities carried at fair values at the end of each reporting date.
48
Curzon Energy Plc
A summary of the financial instruments held by category is provided below:
Financial assets
Cash and cash equivalents
Other receivables
Restricted cash
Financial liabilities
Trade payables
Short-term borrowings
Credit risk
Annual Report 2018
2018
US$
2017
US$
125,621
1,595,035
36,157
125,000
148,616
125,440
370,646
213,812
385,840
578,599
The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from notes and
other receivables. The Directors manage the Group’s exposure to credit risk by the application of
monitoring procedures on an ongoing basis. For other financial assets (including cash and bank
balances), the Directors minimise credit risk by dealing exclusively with high credit rating counterparties.
Credit risk concentration profile
The Group’s receivables do not have significant credit risk exposure to any single counterparty or any
group of counterparties having similar characteristics. The Directors define major credit risk as exposure
to a concentration exceeding 10% of a total class of such asset.
The Company maintains its cash reserves in Barclays Bank UK PLC, which maintains the following credit
ratings:
Credit Agency
Standard and Poor’s Moody’s Fitch
R&I
Long Term
Short Term
Unsupported Group Credit /Baseline
Credit Assessment/Viability Rating
A/Stable
A1/Stable A+
A/Stable
A-1
bbb+
P-1
A3
F1
a
N/A
N/A
Exposure to credit risk
As the Group does not hold any collateral, the maximum exposure to credit risk is represented by the
carrying amount of the financial assets as at the end of each reporting period.
Market risk - interest rate risk
Market risk arises from the Group's use of interest bearing and foreign currency financial instruments. It
is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other
price risk). The Group’s interest rate risk arises from short-term borrowings. Borrowings issued at variable
rates expose the Group to cash flow interest rate risk, which is partially offset by cash held at variable
rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Directors’
policy is to maintain a majority of the Group’s borrowings in fixed rate instruments.
49
Curzon Energy Plc
Annual Report 2018
The Directors have analysed the Group’s interest rate exposure on a dynamic basis. This takes into
consideration refinancing, renewal of existing positions and alternative financing. Based on these
considerations, the Directors believe the Group’s exposure to cash flow and fair value interest rate risk is
not significant.
Market risk - currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign
exchange rates. Currency risk arises when future commercial transactions and recognised assets and
liabilities are denominated in a currency that is not the Group’s measurement currency. The Group is
exposed to foreign exchange risk arising from various currency exposures primarily with respect to the
UK Pound Sterling (£). The Directors monitor the exchange rate fluctuations on a continuous basis and
acts accordingly. The following sensitivity analysis shows the effects on loss before tax of 10%
increase/decrease in the exchange rates of the US$ versus closing exchange rates of UK Pound Sterling
as at 31 December 2018:
Loss before tax
Liquidity risk
+10%
US$
-10%
US$
Increase in loss by
US$88,587
Decrease in loss by
US$88,587
The Group currently holds cash balances to provide funding for normal trading activity. Trade and other
payables are monitored as part of normal management routine and all amounts outstanding fall due in
one year or less.
Capital management
The Group defines capital as the total equity of the Group. The Directors’ objectives when managing
capital are to safeguard its ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
To meet these objectives, the Directors review the budgets and projections on a regular basis to ensure
there is sufficient capital to meet the needs of the Group through to profitability and positive cash flow.
The capital structure of the Group consists of shareholders’ equity as set out in the consolidated statement
of changes in equity. All working capital requirements are financed from existing cash resources and
borrowings.
Whilst the Group does not currently have distributable profits, it is part of the capital strategy to provide
returns for shareholders and benefits for members in the future.
Capital for further development of the Group’s activities will, where possible, be achieved by share issues
or other finance as appropriate.
In order to maintain or adjust the capital structure, the Directors may return capital to shareholders, issue
new shares or sell assets to reduce debt. It also ensures that distributions to shareholders do not exceed
working capital requirements.
The Group has no external debt finance and is not subject to any external capital requirements.
Fair value hierarchy
All the financial assets and financial liabilities recognised in the Group financial statements are shown at
the carrying value, which also approximates the fair values of those financial instruments. Therefore, no
separate disclosure for fair value hierarchy is required.
50
Curzon Energy Plc
21.
Operating lease commitments
Annual Report 2018
All the Group’s leases are short-term leases, which are month-to-month obligations (i.e., UK virtual office,
US virtual office and US storage operating leases). There are no future minimum lease payments under
non-cancellable operating leases to disclose. The UK virtual office lease contract was running from 27
May 2017 until 31 May 2018, so there are no outstanding operating lease commitments to disclose.
All operating land lease agreements for the mining exploration areas are outside of the scope of IAS 17.
Coos County annual lease payment is US$28,971 and is payable bi-annual instalments with payment due
in April and October.
22.
Related party transactions
Balances and transactions between the Company and its subsidiaries, Coos Bay Energy LLC, Westport
Energy Acquisition, Inc., and Westport Energy LLC are eliminated on consolidation and are not disclosed
in this note. Balances and transactions between the Group and other related parties are disclosed below.
Promissory notes
During the year ended 31 December 2018, US$100,000 of promissory notes were issued to YA Global
Investments LP, a company that is also the majority shareholder of the business, see note 16 for further
information.
During the year ended 31 December 2017, Cuart Investments PCC Limited (‘Cuart’) who were holders of
US$404,730 of promissory notes were issued with 1,500,000 warrants with an exercise price of US$0.169
(£0.125) On 04 October 2017, Cuart transferred its entire interest in the promissory note to Barry Liben,
the note has been converted in full into the Ordinary shares of the Company on 31 July 2018, but Cuart
retained the above-referenced warrant see notes 16 and 18 for further information. Cuart is considered
to be a related party of Riverfort Capital, which is controlled by a former Director of the Company, Brian
Kinane.
Remuneration of Directors
The remuneration of the senior Executive Management Committee members, who are the key
management personnel of the Group, is set out in aggregate for each of the categories specified in IAS
24 “Related Party Disclosures” in note 5.
51
Curzon Energy Plc
Company statement of financial position
as at 31 December 2018
Assets
Non-current assets
Investments in subsidiaries
Amounts receivable from subsidiary undertakings
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Total liabilities
Capital and reserves attributable to shareholders
Share capital
Share premium
Merger relief reserve
Warrants reserve
Share-based payments reserve
Accumulated losses brought forward
Loss for the year
Total capital and reserves
Total equity and liabilities
Annual Report 2018
Note
2018
£
2017
£
28
29
30
0
32
33
34
34
2,800,275
1,602,227
4,402,502
3,733,699
1,103,855
4,837,554
28,490
98,991
127,482
4,529,983
87,867
755,104
842,971
5,680,525
222,087
168,486
390,573
87,314
428,877
516,191
770,203
2,675,156
2,800,000
143,942
338,995
(996,104)
(1,592,782)
4,139,410
4,529,983
725,947
2,404,144
2,800,000
143,942
86,405
(293,676)
(702,428)
5,164,334
5,680,525
The financial statements were approved by the Board of Directors and authorised for issue on 29 April
2019 and are signed on its behalf by:
Scott Kaintz
Director
The notes to the Company statement of financial position form part of these financial statements.
52
Curzon Energy Plc
Company statement of changes in equity
Annual Report 2018
Share
capital
£
Share
Premium
£
81,297
569,065
-
-
-
-
-
-
644,650
2,201,850
-
-
-
-
(222,829)
(143,942)
-
-
Merger
relief
reserve
£
Share-
based
payments
reserve
£
Share
warrants
reserve
£
Accumulated
loss
£
Total
£
-
-
-
-
-
-
-
-
2,800,000
-
-
-
-
-
-
-
86,405
-
-
-
-
-
-
-
143,942
-
-
(293,676)
356,686
(702,428)
(702,428)
-
-
(702,428)
(702,428)
-
-
-
-
-
2,846,500
(222,829)
-
86,405
2,800,000
725,947
2,404,144
2,800,000
86,405
143,942
(996,104)
5,164,334
-
-
-
-
-
-
44,256
309,793
-
-
(38,781)
-
-
-
-
-
-
-
-
-
-
-
-
252,590
-
-
-
-
-
-
(1,592,782)
(1,592,782)
-
-
(1,592,782)
(1,592,782)
-
-
-
354,049
(38,781)
252,590
770,203
2,675,156
2,800,000
338,995
143,942
(2,595,758)
4,139,410
Equity as at 1 January
2017
Loss for the year
Other comprehensive
income for the year
Total comprehensive loss
for the year
Issue of shares
Share issue and
fundraising costs
Issue of share warrants
Issue of share options
Acquisition of Coos Bay
Equity as at 31 December
2017
Loss for the year
Other comprehensive
income for the year
Total comprehensive
loss for the year
Issue of shares
Share issue and
fundraising costs
Issue of share options
Equity as at 31 December
2018
53
Curzon Energy Plc
Company statement of cash flows
for the year ended 31 December 2018
Cash flow from operating activities
Loss before taxation
Adjustments for:
Finance expense
Finance income
Share-based payments charge
Impairment of loans and receivables
Impairment of investments in subsidiaries
Unrealised foreign exchange movements
Operating cashflows before working capital changes
Changes in working capital:
Increase/(decrease) in payables
Increase in receivables
Net cash used in operating activities
Financing activities
Issue of ordinary shares
Cost of share issue
Proceeds from new borrowings
Amounts due from subsidiaries
Net cash flow from financing activities
Net (decrease)/increase in cash and cash equivalents in
the period
Cash and cash equivalents at the beginning of the period
Annual Report 2018
Notes
2018
£
2017
£
(1,592,782)
(702,428)
31,499
(39,368)
252,590
3,174
933,424
4,856
(406,607)
(13,993)
68,262
(352,338)
12,522
(36,611)
86,405
-
-
2,656
(637,456)
(4,142)
(87,867)
(729,465)
-
(38,782)
77,208
(342,201)
(303,775)
2,326,500
(222,829)
-
(629,817)
1,473,854
(656,113)
755,104
744,389
10,715
Cash and cash equivalents at the end of the period
98,991
755,104
54
Curzon Energy Plc
Notes to the Company financial statements
23.
Significant accounting policies
Annual Report 2018
The separate financial statements of the Company are presented as required by the Companies Act 2016
(“the Act”). As permitted by the Act, the separate financial statements have been prepared in accordance
with International Financial Reporting Standards.
The financial statements have been prepared on the historical cost basis. The principal accounting
policies adopted are the same as those set out in note 2 to the consolidated financial statements except
as noted below.
Company statement of comprehensive income
As permitted by Section 408 Companies Act 2006, the Company has not presented its own income
statement or statement of comprehensive income. The Company’s loss for the financial year was
£1,592,782 (2017: £702,428). The Company’s total comprehensive loss for the financial year was
£1,592,782 (2017: £702,428).
Investments in subsidiaries
Investments that were previously reported as available-for-sale investments under IAS 39, were re-
classified as financial instruments with fair value through other comprehensive income (FVTOCI), are
stated at fair value of the consideration and reviewed for impairment, if there are any indications that the
carrying value may not be recoverable.
Receivables from subsidiaries
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.
24.
Critical accounting judgements and key sources of estimation uncertainty
The Company’s finacial statements, and in particular its investments in and receivables from subsidiaries,
are affected by the critical accountin judgements and key sources of estimation uncertainty in respect of
the recoverability of exploration and evaluation assets which are described in note 2 to the consolidated
financial statements.
Recoverability of investment in subsidiaries and amounts due from subsidiaries
Where the majority of the assets of subsidiary undertakings are exploration and evaluation assets,
determining whether an investment in and loan to a subsidiary is impaired requires an assessment of
whether there are any indicators of impairment, of these underlying exploration and evaluation assets. If
there is any indication of potential impairment, an impairment test is required based on value in use of the
asset. This assessment involves judgement as to: (i) the likely future commerciality of each cost pool of
assets; (ii) when such commerciality should be determined, and (iii) the potential future revenues and
value in use. The value in use calculation requires the entity to estimate the future cash flows expected
to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
25.
Auditor’s remuneration
The auditor’s remuneration for audit and other services is disclosed in note 4 to the consolidated financial
statements.
55
Curzon Energy Plc
26.
Directors and staff
Annual Report 2018
There were no staff employed by the Company during the year ended 31 December 2017. Scott Kaintz,
Executive Director of the Company, has been employed since 5 November 2018.
Key management remuneration is disclosed in note 5 to the consolidated financial statements.
27.
Administrative expenses
Staff costs
Share based payments
Professional and consultancy fees
Other general administrative expenses
Total
28.
Investments
Investment in subsidiaries
Costs at beginning of the year
Additions
Impairment
Total
2018
£
2017
£
137,650
252,590
153,857
118,275
662,372
46,012
86,405
333,418
222,830
688,665
2018
£
3,733,699
2017
£
-
-
3,733,699
(933,424)
-
2,800,275
3,733,699
The impairment figure utlized of £933,424 was calcuated based on DCF and qualitative analysis of the
Company’s investment in Coos Bay Energy LLC. The Company considered factors such as the cost of
drililng new coal bed methane wells, estimated gas flow rates, royalties and anticipated operating
expenses. The reduction in the value of the subsidary represents a proportion fo the work completed in
2018 that may not form a definitive part of the Company’s future efforts at the project. The Company’s
subsidiaries are disclosed in note 11 to the consolidated financial statements.
29.
Receivables from subsidaries and related party transactions
Loans to subsidiaries
2018
£
2017
£
1,602,227
1,103,855
1,602,227
1,103,855
The Group (comprising Coos Bay Energy LLC and its directly and indirectly wholly-owned subsidiaries
Westport Energy Acquisition, Inc. and Westport Energy LLC ) is a related party through common control.
56
Curzon Energy Plc
Annual Report 2018
During the period ended 31 December 2018, the maximum amount owed by the Group to the Company
was £1,602,227 (2017: £1,138,435). The related party loans are unsecured and are repayable on 31
December 2019. Interest is receivable at a rate of 9%. At 31 December 2018, £39,368 (2017: £58,034)
was accrued and included in the above balance. The carrying amount of these assets approximates their
fair value. No expected credit losses were recognised in relation to these intercompany loans during the
reporting period and at 31 December 2018. There was no increase in credit risk in relation to these loans
at year end compared to their credit risk at inception. Please also see note 35.
The remuneration of the senior Executive Management Committee members, who are the key
management personnel of the Group, is set out in aggregate for each of the categories specified in IAS
24 “Related Party Disclosures” in note 5.
30.
Prepayments and other receivables
VAT recoverable
Prepayments
Other debtors
2018
£
18,292
10,199
-
28,491
2017
£
84,693
3,174
87,867
The fair value of receivables and deposits approximates their carrying amount, as the impact of
discounting is not significant. The receivables are not impaired and are not past due.
31.
Cash and cash equivalents
For the purpose of the statements of cash flows, cash and cash equivalents comprise the following:
Cash in hand and at bank
32.
Current liabilities
Trade and other payables
Trade and other payables
Accruals
33.
Short-term borrowings
2018
£
98,991
2017
£
755,104
2018
£
133,254
88,833
222,087
2017
£
29,814
57,500
87,314
As at 31 December 2018, the Company had an outstanding promissory note of £168,486 (2017: 428,877),
please refer to note 16.
34.
Share capital
The movements in the share capital account are disclosed in note 17 to the financial statements.
57
Curzon Energy Plc
Annual Report 2018
35.
Financial instruments – risk management
The Company’s strategy and financial risk management objectives are described in note 20.
Principal financial instruments
The principal financial instruments used by the Company from which risk arises are as follows:
Financial assets
Cash and cash equivalents
Other receivables
Loans due from subsidiaries
Financial liabilities
Trade payables
Short-term borrowings
2018
£
2017
£
98,991
18,292
755,104
87,867
1,602,227
1,103,855
133,254
168,486
29,814
428,877
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Company.
In addition to the risks described in note 20 , which affect the Group, the Company is also subject to credit
risk on the balances receivable from subsidiaries, see note 29.
36.
Events after the reporting period
Equity Placing and Loan Note Update
On 1 March 2019 the Company announced the placing of 6,012,655 new ordinary shares of £0.01 each
at a price of £0.0158 per share. Investors in these shares also received 1 warrant for every 2 placing
shares purchased exerciseable into ordinary shares at a price of £0.0158 per ordinary share for a period
of twenty four months following the placing. The gross proceeds raised from the placing were £95,000.
The Company further announced that YA Global Investments, an entity related to the Company’s largest
shareholder, would commence a draw down of a matching amount to the completed placing. At the time
of the annoucement the Company retained $900,000 undrawn on the $1,000,000 facility.
On 16 April 2019 the Company signed an amendment letter with YA Global Investment, LP, in which the
parties agreed that in respect of the first tranche of $100,000, and in respect of any further tranches to be
drawn down, the Company shall pay the total principle amount outstanding on the last business day of
October 2020.
Directorate Changes
On 15 March 2019 the Company announced that Brian Kinane had resigned as a Director of the
Company.
37.
Controlling party
As at 31 December 2018, the Company did not have an ultimate controlling party.
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