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Deltic Energy Plc
1st Floor
150 Waterloo Road
London
SE1 8SB
United Kingdom
+44 (0)20 7887 2630
www.delticenergy.com
Deltic Energy Plc
Annual Report & Accounts 2021
262577_Deltic_2021_AR_COVER SPREAD 3.3mm.qxp 05/05/2022 10:58 Page 2
Contents
Company Information
Strategic Report
1 Chairman’s Statement
2 Chief Executive’s Statement
5 Operational Review
12 Environment Social and Governance
14 Financial Review
15 Business Risks
16 Section 172 Statement
17 Investing Policy
Corporate Governance
18 Introduction
18 Corporate Governance Statement
21 Audit Committee Report
22 Remuneration Committee Report
23 Board of Directors and Senior Management
24 Report of the Directors
26 Statement of Directors’ Responsibilities
27 Independent Auditor’s Report
Financial Statements
33 Income Statement
33 Statement of Comprehensive Income
34 Balance Sheet
35 Statement of Changes in Equity
36 Statement of Cash Flows
37 Notes to the Financial Statements
Directors
M S Lappin (Chairman)
G C Swindells (Chief Executive Officer)
A J Nunn (Chief Operating Officer)
P N Cowley (Non-Executive)
P W Nicol (Non-Executive)
Joint Secretary
S M McLeod
Registered Office
150 Waterloo Road
1st Floor
London
SE1 8SB
Registered Number
07958581 (England and Wales)
Gravitas Company Secretarial Services Limited
Nominated Adviser & Joint Corporate Broker
Allenby Capital Limited
5 St Helen's Place
London
EC3A 6AB
Joint Corporate Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Auditors
BDO LLP
London
W1U 7EU
55 Baker Street
Solicitors
K&L Gates LLP
One New Change
London
EC4M 9AF
Financial Public Relations
Vigo Consulting
Sackville House
40 Piccadilly
London
W1J OHR
Registrar
Crosby Way
Farnham
Surrey
GU9 7XX
Share Registrars Limited
3 The Millennium Centre
Perivan 262577
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Chairman’s Statement
Chairman’s Statement
Looking back at my statement of a year ago, with the pandemic dominating the news, I couldn’t have imagined what we are
faced with today, with a global power having launched an attack on a neighbour in Europe.
As a result, we have learned that there are very real consequences to relying on natural gas from Russia. Whatever the outcome
of the situation in Ukraine, Europe’s position on Russian gas has undoubtedly changed for the foreseeable future.
At the same time, and partly as a consequence of these events, we have seen energy prices spiralling upwards. The UK gets a
relatively small portion of its gas from Russia by pipeline and by Liquified Natural Gas (LNG), brought on ships. However, moves
away from Russian natural gas for our European neighbours causes further escalation of prices from global producers which
then itself leads to further escalation of the cost of living and household spending.
With that background, our business is positioned to play its part in providing these vital natural resources. Contributing to the
essential domestic supply of natural gas from North Sea waters has always been the very core of our business.
The UK Government is supportive of our sector, sharing our view that a domestic gas supply is better for energy security, jobs,
Treasury receipts and the environment compared with importing higher emission supplies. This is apparent in the North Sea
Transition Deal of 2021 and the Energy Security Strategy published just a few weeks ago.
Direction towards favourable policy has helped our business in attracting high-quality international joint venture partners, but
the bumps along the road, machinery of policy-making and the volatility of recent months have undoubtedly impacted the
exact timing of commitment towards operations and contracts.
Our industry continues to face challenges. The challenges change but they are always there. As a responsible nation, aware of
the potential risks from climate change, we need to use this valuable resource wisely and deal with the associated greenhouse
gas emissions in order to prevent them from being released into the atmosphere. Some do not see this as the solution.
A popular narrative is to transition away from oil and gas rather than continuing to reap its benefits alongside other natural
resources such as wind, solar and nuclear. All predictions from independent sources such as the Climate Change Committee
and United Nations Climate Panel show oil and gas as part of the future energy mix for the UK and the world for decades to
come.
Deltic Energy is committed to being part of the energy transition while continuing to explore for natural resources in the North
Sea with a focus on natural gas. Natural gas heats homes, lights rooms and cooks meals. Fuels such as natural gas are needed
to make cement, steel, glass and bricks; materials that are integral to our society.
Each member of the Deltic team is proud to play this role.
Our business model is a simple but a highly effective one. We have developed a conveyor belt of opportunities from picking up
licences in areas where we have demonstrated expertise such as the Southern North Sea, developing prospects by thorough
technical work and new data acquisition where appropriate, bringing in world-class operators as partners for exploration well
drilling in order to get these valuable resources to the UK shores. We currently have acreage at each stage along our conveyor
belt up to drilling, and are preparing to drill our first exploration well at Pensacola with operator Shell within the coming
months. Acreage farmed out to Shell and Capricorn Energy PLC (“Capricorn”) (previously Cairn Energy PLC) is moving forward
along this process to a similar conclusion and other acreage is being worked towards farm-out.
The Deltic business is in good shape and poised for an exciting period of exploration in the coming months.
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Mark Lappin
Chairman
22 April 2022
Deltic Energy Plc Annual Report & Accounts 2021
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Chief Executive’s Statement
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2021 has been a year of significant achievement and continued progress. The major highlights for the year have been the
positive well investment decision and firm commitment to drill our Pensacola Prospect as well as successfully attracting a new
high-quality partner into five of our Southern North Sea gas licences by way of a wide ranging farm-out. I am particularly
excited that as a direct result of this progress, we are now on the verge of drilling our first exploration well this year. It has also
been a significant development for Deltic to have broadened its partner base with another well-established operator who
clearly sees the opportunity that the Southern North Sea presents. As well as providing further endorsement of our prospects
and high quality technical work, the additional partnership will ensure significant additional operational activity across our
portfolio in the course of the coming year. Having created a portfolio of highly prospective opportunities which is now being
progressed with multiple partners, I believe Deltic is in a strong position and geared for exploration success.
Pensacola
The early part of 2021 was focussed on the completion of the technical work to support a well investment decision to drill
Pensacola. The outcome of that work was very positive with the evaluation of the new 3D data acquired resulting in a
significant de-risking of the prospect, with the geological chance of success increasing from 20% to 55%. The final stage of the
technical (and commercial) work supported the positive decision to commit to a firm well on Pensacola which will see Deltic
drilling its first well this year.
Following the commitment to drill Pensacola, the focus of activity moved to well planning which progressed rapidly. The
geophysical site survey over the planned well location was completed in September and the geotechnical survey, representing
the final phase of the site survey programme, was completed in October. The surveys, conducted by Fugro GB North Marine
Limited, were completed on time and without incident. The successful completion of the programme, which is a key part of well
planning and the final phase of offshore activities ahead of drilling, represented another important milestone in our steady
progress towards drilling the Pensacola prospect.
Preparations for the key catalyst of the drilling of Pensacola are advancing on a range of fronts as the JV gets closer to the start
of operations. Analysis of site survey data, undertaken as a standard but important part of the ongoing well planning process,
has identified hard seabed conditions at the well location which have in part informed Shell’s well-advanced rig selection and
contracting process as the JV seeks to ensure straightforward, safe and efficient operations. This process is being factored into
the planning schedule, with Shell now indicating that drilling is expected to commence towards the end of Q3 2022.
Pensacola is a Zechstein Reef prospect located to the northwest of the Breagh gas field in the Southern North Sea. Deltic
estimates the Prospect to contain gross P50 Prospective Resources of 309 BCF which will rank Pensacola as one of the highest
impact exploration targets to be drilled in the gas basin in recent years. Drilling success will be transformational both for Deltic
and the emerging Zechstein reef play.
The Pensacola well is also being highly anticipated by the industry for its potential to unlock a significant new source of gas to
the UK from the Zechstein Reef play, which has been successfully produced in NW Europe from Poland to The Netherlands. It
also has the potential to demonstrate that the UK still has a significant level of previously unrecognised exploration upside
which can deliver cost competitive natural gas to UK based businesses and homes and support the UK’s Net Zero targets.
Selene
On the Company’s Selene Prospect on Licence P2437, Deltic’s other licence with Shell, the JV has continued to refine its
technical and commercial work to support a well investment decision, which the Company is continuing to target within the
coming months. Deltic’s conviction in Selene has further increased throughout this process resulting in an uplift in estimated
P50 recoverable resources to 318 BCF. With Phase A of the licence due to conclude in September this year, in line with good
licence management, the JV has taken the prudent step of approaching the North Sea Transition Authority (‘NSTA’) to seek an
extension to Phase A. Deltic continues to consider Selene to represent the largest undrilled structure of its kind in this part of
the SNS, and with an estimated 70% geological chance of success remains committed to progressing this material prospect to
drilling.
Capricorn Energy Farm-in to Licences P2560, P2561, P2562, P2567 and P2428
A key highlight of 2021 was the farm-out of five of our gas licences in the Southern North Sea to Capricorn which represented a
further endorsement of the quality of the assets that our team has developed and our gas- focussed exploration strategy, as we
continue to develop our portfolio of opportunities and attract the highest quality partners.
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Chief Executive’s Statement
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The farm-out was announced in August and completed in November 2021 with the key terms being as follows:
• Capricorn acquired a 60% interest in each of Licences P2428 (Cupertino Area) and P2567 (Cadence) and a 70% interest in
each of Licences P2560, P2561 and P2562 which are located between the Breagh and Tolmount Gas Fields.
• Deltic received consideration of USD$1 million as a contribution towards historic costs.
• Deltic retained a 40% interest in licences P2428 and P2567 and a 30% interest in licences P2560, P2561 and P2562.
• Capricorn is funding 100% of an agreed work programme for each of the five licences up to the point of making a drill or
drop decision on each licence, which includes the acquisition of new seismic data over Licence P2428 (which was acquired
in Autumn 2021).
• Following a drilling decision being made on either of P2428 and P2567, Capricorn will fund 70% of the costs of whichever
well is drilled first, subject to a gross well cost cap of USD$25 million.
• Capricorn became Operator of each of the licences.
This transformational and wide-ranging farm-out across multiple licences and our partnership with Capricorn will see significant
investment being made across Deltic’s strategic Southern North Sea gas exploration portfolio. It has been particularly
encouraging to see the pace at which activity on the licences has already occurred.
Acquisition of the 3D seismic survey over Licence P2428 commenced in September. Approximately 680km2 of new data over
the Plymouth Zechstein Reef prospect and surrounding areas was acquired and completed in November. The data collected is
now being processed with the results expected during the course of May 2022. The results of this high quality modern 3D
seismic survey are expected to significantly enhance our understanding of the multiple gas prospects on P2428 and will be key
to de-risking future drilling on this licence. As was the case with the Pensacola Prospect which was derisked following the
acquisition of new seismic. The acquisition and processing of the seismic data already fulfils the work programme commitments
of this licence. The final processed data will allow Capricorn and Deltic to fast track the assessment of prospectivity and the JV
is now aiming to be in a position to make a drilling decision by the end of Q3 this year.
We are particularly excited at the prospect of continuing to build our partnership with Capricorn, with both parties sharing a
commitment to pursuing high impact exploration opportunities in the Southern North Sea and successfully developing these
gas prospects.
Central North Sea
The Company holds two licences in the Central North Sea, P2352 (which contains the Dewar prospect) and P2542 (which
contains the Syros prospect).
The Dewar Prospect is a 30th Round licence which, despite attracting initial farm-out interest, saw the progression of
discussions adversely affected by Covid. However, Dewar remains an attractive, highly prospective and relatively low risk
opportunity located in close proximity to other fields and existing infrastructure and one which could be developed very
quickly. As such, Dewar remains an attractive drill-ready prospect with strong economics. Continued strengthening in the oil
price has seen renewed interest and engagement from interested parties and Deltic remains committed to seeking a suitable
partner to ultimately drill the prospect, in line with our strategy.
P2542, also located in the Central North Sea, contains the Syros Prospect and is a more recent licence award. Technical work
has commenced, and the new data having recently been obtained with initial work looks encouraging. This work will continue
with a view to commencing a farm-out process in due course.
Board appointment
In November, I was delighted to welcome Peter Nicol to the Board of Deltic. Peter has outstanding experience in the energy
sector both in industry and in senior investment banking positions. Peter has worked with several listed oil and gas companies
and is currently an independent non-executive director of a number of exploration-focussed companies. We are already
benefitting from Peter’s wealth of energy sector, financial, city and public company experience which will be invaluable to Deltic
as we continue to build our business.
Outlook
As I write, recent events mean that energy security has never felt more important. Soaring energy prices with its impact on
energy intensive industry and households alike has acutely highlighted the consequences of having domestic production. UK
domestic production does not come close to meeting even half of national demand. There is heavy dependence on imports
from foreign countries, including Russia. The effect of this reliance is compounded when considering the significantly higher
emissions associated with gas imported in the form of LNG. It is abundantly clear that a secure supply of domestically
produced oil and gas is much better for jobs, the UK economy and, importantly, the environment. Accordingly, it is imperative
that the UK continues to encourage further exploration. The UK still has a significant level of previously unrecognised
exploration upside which we know can deliver cost competitive and low carbon intensity natural gas to UK-based businesses
and homes while at the same time supporting the UK’s Net Zero targets.
Deltic Energy Plc Annual Report & Accounts 2021 03
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Chief Executive’s Statement
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The UK oil and gas industry has a vital role to play in the energy transition. Deltic is fully supportive of ‘net zero’ ambitions and,
with a largely gas dominated portfolio, we believe we have the potential and ability to contribute to this transition. Indeed, we
are confident that all of our Southern North Sea gas prospects have the potential to be developed in a manner which is entirely
consistent with Net Zero goals.
Deltic welcomes the UK Government’s Energy Security Strategy announced earlier this month. In addition to committing to
maximise North Sea production it confirmed that a new North Sea licensing round will be brought forward and launched in the
Autumn. Previous licensing rounds have been a key source of success and growth of Deltic’s portfolio in recent years, and as
such we are particularly encouraged by this development. Accordingly, Deltic is already commencing its plans to invest in
applications both individually and in partnership as we look to continue to expand the Company’s conveyor belt of drilling
opportunities.
The progress made throughout 2021 has created the foundation for what has the potential to be a very exciting year ahead. We
will shortly be drilling our first well with Shell on the Pensacola Prospect with success being potentially transformational for our
company. At the same time, we expect to significantly progress the five licences we now have in partnership with Capricorn. We
should see the results of the newly acquired and processed 3D seismic data over Licence P2428 before the end of Q2 which
will enable the JV to fast-track an assessment of prospectivity in this area and support a well investment decision later in the
year. We will also continue to progress our 100% owned licences in the Central North Sea with a view to farm-out and drilling
and look forward to the launch of the UK’s 33rd Licensing Round in the Autumn.
With our conveyor belt of opportunities, high quality partners, and activity, we anticipate a potentially transformational year as
we continue to strive to create value for our shareholders.
Graham Swindells
Chief Executive Officer
22 April 2022
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Operational Review
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Introduction
Significant progress has been made across the portfolio during the reporting period with key highlights being confirmation of
exploration drilling on the Pensacola prospect in March 2021 and securing a successful outcome to the farm-out process on
Licence P2428 which ultimately resulted in Capricorn committing to a significant work programme investment across a total of
five of Deltic’s Southern North Sea licences as announced on the 12th August 2021.
P2252 – Pensacola (30% Deltic)
On 29 March 2021, the Shell-Deltic JV confirmed its intention to drill the Pensacola exploration well. Preparatory works are well
advanced: the site survey works completed in October 2021, long lead items have been ordered and environmental permitting
for the drilling activities are underway.
Preparations for the key catalyst of the drilling of Pensacola are advancing on a range of fronts as the JV gets closer to the start
of operations. Analysis of site survey data, undertaken as a standard but important part of the ongoing well planning process,
has identified hard seabed conditions at the well location which have in part informed Shell’s well-advanced rig selection and
contracting process as the JV seeks to ensure straightforward, safe and efficient operations. This process is being factored into
the planning schedule, with Shell now indicating that drilling is expected to commence towards the end of Q3 2022.
Licence P2252, located in the Southern North Sea Gas Basin, contains the Pensacola prospect which is estimated to contain
gross P50 Prospective Resources of 309 BCF in a Zechstein carbonate build-up. The licence was farmed out to Shell U.K. Ltd in
2019, which resulted in the Company being fully carried through the 3D seismic acquisition and processing-based work
programme through to well investment decision. Following the well investment decision on 29 March 2021, Deltic is now paying
its 30% share of costs associated with this well and remains fully funded for its share.
During the period, a review of the additional potential prospectivity associated with the P2252 licence, but unrelated to
Pensacola, was completed by the Operator and the JV took the decision to relinquish the southern portion of P2252 licence
and realise a significant saving on annual licence rental costs. The relinquished area represented approximately 40% of the
overall licence area and contained the Lytham prospect which was not considered sufficiently attractive to retain.
P2437 – Selene (50% Deltic)
During the period, Deltic continued to refine its subsurface models and development scenarios for the Selene prospect. This
work has resulted in an uplift in Gross P50 Prospective Resources from 271 BCF to 318 BCF and a tightening of the P90-10
range from 82-552 BCF to 132-581 BCF. The geological chance of success (GCoS) remains unchanged at 70%.
Deltic remains convinced that the Selene prospect is a significant and strategic exploration opportunity in the mature Leman
Sandstone fairway and remains fully committed to drilling an exploration well on the prospect at the soonest practicable
opportunity.
Licence P2437 is located in the Leman Sandstone fairway of the Southern North Sea Gas Basin and contains the Selene
prospect which we believe is the largest undrilled prospect in this mature play. The P2437 licence was farmed out to Shell U.K.
Ltd in 2019 with Deltic retaining a 50% interest and operatorship until a final well investment decision is made. Under the terms
of the farm-out, once the well investment decision is taken, Shell assume operatorship and pay for 75% of the costs of the initial
exploration well up to a gross well cost of USD$25M.
P2428 – Cupertino / Plymouth Area (40% Deltic)
Licence P2428 contains prospects in each of the Carboniferous, Leman Sandstone and Zechstein Carbonates and was included
in the farm-out to Capricorn announced in August. Following completion of that transaction, a 60% working interest in licence
P2428, along with licence operatorship, has been transferred to Capricorn. Under the terms of the farm-in agreement Capricorn
are paying 100% of the costs of the technical evaluation for the licence up until the point at which a firm well investment
decision is made.
The primary target on the P2428 licence area is the Plymouth Zechstein reef prospect and as part of the farm-out agreement
Capricorn funded the acquisition of 680km2 of new multi-client 3D data over the Plymouth prospect and surrounding areas.
The 3D seismic acquisition was completed in late November 2021 and data processing is ongoing with final deliverables
expected in May 2022. Early versions of the seismic data have been viewed and a clearer picture of the Plymouth prospect and
other potential opportunities on block are starting to emerge. Once the processing workflows have been completed, we expect
that this new 3D seismic data will allow a full evaluation of the Plymouth prospect and other opportunities in the underlying
Leman and Carboniferous Sandstones.
A drilling decision is expected to be made in the second half of this year once this new data has been fully evaluated by the
Capricorn-Deltic JV.
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Operational Review
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P2567 – Cadence (40% Deltic)
Licence P2567 contains prospects in both the Carboniferous and Triassic Bunter Sandstone and was included in the farm-out to
Capricorn announced in August. Following completion of that transaction, a 60% working interest in licence P2567, along with
licence operatorship, has been transferred to Capricorn. Under the terms of the farm-out agreement Capricorn are paying 100%
of the costs of the technical evaluation of the licence up until the point at which a firm well investment decision is made.
It is anticipated that technical work over the coming months will focus on the reprocessing of the legacy 3D seismic survey that
covers 100% of the licence area which will in turn be followed by detailed technical evaluation of the previously identified
prospectivity.
P2560, P2561 & P2562 – South Breagh Area (30% Deltic)
Licences P2560, P2561 and P2562 were awarded in the most recent 32nd Licensing Round. The licences contain early stage
exploration opportunities located between the Breagh and Tolmount gas fields and have significant potential in the
Carboniferous sandstones, Permian Leman Sandstones and the Zechstein carbonates.
All three licences were included in the farm-out to Capricorn and following completion of that transaction, a 70% working
interest in each of the three licences, along with licence operatorship, has been transferred to Capricorn. Under the terms of the
farm-out agreement Capricorn are paying 100% of the costs of the technical evaluation for each licence up until the point at
which a firm well investment decision is made on each licence.
During and post the transaction process, Deltic has worked closely with Capricorn to ensure that the JV is fully aligned with
respect to the exploration potential over the area and Capricorn continue to evaluate the existing legacy datasets and develop
a comprehensive exploration work programme for the area. We expect that reprocessing a number of the legacy 3D seismic
datasets will be the priority over the coming 6 to 12 months which will provide a sound basis for the more detailed geological
evaluation required to mature a number of the identified leads into potential drilling opportunities.
P2352 – Dewar (100% Deltic)
Licence P2352, located in the Central North Sea, was awarded to the Company in the 30th UK Offshore Licensing Round with
an effective date of 1 October 2018.
During the period, work continued on fully integrating the previously completed AVO study into the company’s geological
model for the Dewar prospect. As a result of this work, the geological model for this Forties Sandstone channel prospect is now
much more robust. However, the gross P50 Prospective Resources have been reduced from 39.5mmbo to 20.8mmbo with a
P90-P10 range of 10 to 38.2mmbo. The GCoS of 41% remains unchanged.
In the event of exploration success, the Dewar Prospect will represent a highly attractive commercial proposition as it is located
approximately 5km east of BP’s Eastern Trough Area Project (ETAP) Central Processing Facility.
With the recent recovery in oil prices, there has been a renewed interest in the Dewar Prospect and over the coming months we
will continue to pursue farm-out discussions with companies that have shown recent interest and those with whom we had
established a positive dialogue prior to the Covid enforced lockdowns.
P2542 – Syros (100% Deltic)
Licence P2542 located in the Central North Sea and which contains the Syros prospect, was awarded to Deltic in the most
recent 32nd Licensing Round. Technical work on this licence, has commenced with newly reprocessed seismic data having
recently been obtained. Work will focus on maturing the Syros prospect using recently released seismic and offset well
datasets not available to previous licence operators such that farm-out marketing can be commenced in mid-2022.
Portfolio Management
As disclosed in our interim statement in September 2021, during the period our technical review of Licence P2424 was
completed. Although we identified significant resource potential associated with the Licence, the prospects identified were
particularly high risk when compared to other opportunities within the portfolio. The currently available seismic datasets are
not of sufficient quality to adequately de-risk the prospects and therefore it was considered unlikely that a positive well
decision could be made on any prospect within the licence area without the acquisition of new 3D seismic data. Therefore, the
decision was taken to allow this licence to lapse at the end of its Phase A on 30 September 2021.
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Operational Review
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Licence P2384 in the Central North Sea which was awarded as a remnant of a much larger multi-block licence application in the
30th Offshore Licensing Round and retained purely for its option value. Following a review of the prospectivity associated with
this very small licence it was clear that it only captured the very fringes of the prospects targeted in the original licence
application. Given that there was no obvious drilling target located on block it was decided to also relinquish this licence on
30 September 2021.
33rd Licensing Round
The UK government recently announced its British Energy Security Strategy on 6 April 2022 in which a new offshore licensing
round, scheduled to commence in the Autumn of 2022, was confirmed. Deltic has been busy working on identifying and
maturing a number of potential opportunities in the Southern and Central North Seas which we plan to use to support multiple
licence applications on both a 100% basis and in conjunction with established industry partners.
Full details of the round, blocks available for licensing and submission timelines are expected to be announced by the NSTA in
due course.
Andrew Nunn
Chief Operating Officer
22 April 2022
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Operational Review
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Qualified Person
Andrew Nunn, a Chartered Geologist and Chief Operating Officer of Deltic, is a “Qualified Person” in accordance with the
Guidance Note for Mining, Oil and Gas Companies, June 2009 as updated 21 July 2019, of the London Stock Exchange. Andrew
has reviewed and approved the information contained within this announcement.
Southern North Sea
Portfolio and Resource Summary
The Company’s current licence portfolio and prospect inventory, as of the end of March 2022, is summarised below:
Net Prospective
Discovery (D) Resource (BCF)
Licence Deltic Prospect (P) P90 P50 P10 GCoS
Ref: Block ID Equity Project ID Lead (L) Low Best High %
P22521
41/5a,
41/10a &
42/1a
30%
P2437
48/8b
50%
P24282
43/7 &
43/8
40%
P25672
P24353
P22581
P25602
P25612
43/11
&
43/12b
47/10d &
48/6c
41/5b &
42/1b
42/13b
42/17 &
42/18
42/19 &
42/20b
40%
25%
30%
30%
30%
Pensacola – Zechstein Reef P 12 93 354 55
Sloop – Leman D 4 9 19 100
Selene – Leman P 66 159 290 70
Endymion – Leman L 18 24 31 27
Rig & Jib – Leman L 7 18 29 35
Cupertino – Scremerston P 37 148 454 26
Richmond – Leman P 25 84 219 20
Plymouth – Zechstein P 13 113 507 19
Cadence – Scremerston P 12 57 189 26
Cadence – Fell L 75 182 344 16
Cordova – Millstone Grit L 13 50 131 26
Bassett – Bunter Sst P 14 51 121 37
Bathurst – Bunter Sst L 48 110 228 22
Bob (Teviot) – Leman D 2.8 5.5 10.3 100
Blackadder – Leman P 17.8 28.3 42.5 45
Pensacola North To Be Determined
To Be Determined
To Be Determined
P25622
42/22 &
42/23
30%
To Be Determined
1 Operated by Shell
2 Operated by Capricorn
3 Operated by Parkmead
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Operational Review
continued
Central North Sea
Net Prospective
Discovery (D) Resource (MMBOE)
Licence Deltic Prospect (P) P90 P50 P10 GCoS
Ref: Block ID Equity Project ID Lead (L) Low Best High %
P2352
22/24f &
22/25g
100%
Dewar – Forties P 10 20.8 38.2 40
Tesla – Pentland
To be determined – mean
STOIIP estimated @ 24 mmboe
D
P2542 22/17a 100% Syros To be determined
Andrew Nunn
Chief Operating Officer
22 April 2022
Deltic Energy Plc Annual Report & Accounts 2021 09
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Operational Review
Our Locations - Southern North Sea
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P2558
PENSACOLA
DARACH
P2252
N
PLYMOUTH
CROSGAN
P2428
FORBES
BREAGH
CADENCE
ESMOND
P2567
ANDROMEDA
PEGASUS
P2560
P2561
P2562
TOLMOUNT
RAVENSPURN
BABBAGE
P2435
WEST SOLE
SELENE
P2437
BARQUE
Hull
MERCURY
Deltic Licences
Licensed Blocks
Fields
Gas
Oil
Prospects & Leads
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Operational Review
Our Locations - Central North Sea
NELSON
N
HUNTINGTON
MONTROSE
CAYLEY
ARBROATH
P2542
SYROS
MARNOCK
SKUA
P2352
DEWAR
CULZEAN
MADOES
SEAGULL
Deltic Licences
Licensed Blocks
Fields
Oil
Condensate
Gas
FRANKLIN
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Environment Social and Governance
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Priorities and Supporting Policy Framework
As a responsible and diligent investor in hydrocarbon exploration and appraisal assets, the Company recognises that it is in the
best interest of our investors to incorporate Environmental, Social and Governance aspects into our investment analysis,
decision-making and portfolio management processes. In January 2020, the Company introduced a specific ESG Policy to
support our existing Environment and Occupational Health and Safety Policies.
The Company supports the 2050 Net Zero Emissions target set out in law by the UK government and the ambitious OGUK
Roadmap 2035 which aims to see the E&P industry in the UK reach Net Zero well ahead of general UK targets. These targets
acknowledge the significant role that natural gas will play in achieving Net Zero and Deltic’s gas focussed exploration portfolio
has the potential to underpin the vital role that natural gas will undoubtedly play in blue hydrogen production over the next two
to three decades.
During 2021, we formalised the data capture and reporting procedure for the Company’s Scope 1 and Scope 2 emissions
associated with our operated assets which is in line with the methodology employed by our key partners. Deltic’s adopted
reporting process is based on the UK governments Streamlined Energy and Carbon Reporting (SECR) which implements the
Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (“the 2018
Regulations”) and aligns with relevant emissions reporting requirements required by the NSTA.
In addition to formalising the process of measuring and reporting our existing emissions, Deltic commissioned Crondall Energy
to review the potential development options and technologies which would ensure the alignment of any future production
activities associated with our Southern North Sea gas assets with the Oil and Gas UK’s 2035 road map and the UK
Government’s Net Zero 2050 targets. The study looked at options ranging from simple efficiency through design, use of
onboard renewables on production facilities and electrification to various export vectors from offshore (ie. gas, electricity,
hydrogen and ammonia) and the potential for full cycle production including blue hydrogen production and carbon capture
and storage. The report concluded that a range of scalable options is available to develop the portfolio in line with Net Zero
goals depending on the magnitude and location of future exploration success.
Health & Safety Performance
The health and safety of our staff, contractors and other stakeholders is a key focus as we continue to grow the business and
our operational scope. There were no reportable incidents or LTI’s reported in conjunction with the Company’s activities in 2021.
The Company records health and safety performance and statistics in compliance with the Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations 2013 (RIDDOR).
2021 2020 2019
First Aid Incidents 0 0 0
Lost Time Injuries (1-7 days) 0 0 0
RIDDOR Reportable 0 0 0
Fatalities 0 0 0
Estimated Total Work Hours 9,064 9,390 10,095
Climate Related Emissions and Energy Performance
As a non-producing office based organisation with no operated offshore activity in the 2021 reporting period, the magnitude of
climate related emissions associated with the Company’s activities is limited. NSTA mandatory reporting of Fugitive Methane
Emissions, Scope 1 and 2 emissions per barrel of oil equivalent production and Carbon Intensity Statements are not relevant to
the Company at this stage of its development, however the Company will undertake to monitor and report its annual total
Scope 1 (direct from gas combustion on site and vehicle fleet) and Scope 2 (indirect from electricity purchased) until such time
that the NSTA defined metrics are applicable.
Currently the Company has a negligible Scope 1 emissions footprint and Scope 2 emissions are limited to electricity required to
support office based activities at our registered office.
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Environment Social and Governance
continued
Reporting Units 2021 2020
Direct GHG Emissions (Scope 1)a kgCO2e 0 0
Indirect GHG Emissions (Scope 2)b kgCO2e 5,939 6,186
Total Scope 1 & 2 Emissions kgCO2e 5,939 6,186
Carbon Intensity kgCO2/boe N/A N/A
Methane Intensity % N/A N/A
Energy Consumption kWh 27,974 26,534
a) We report GHG emissions energy consumption from our managed operations in the UK
b) Emissions from the purchase of electricity for our managed operations based on UK Government published conversion factors for the relevant year
c) Since 20th January 2020 our Fixed Business Plan uses 100% renewable electricity
Scope 3 emissions reporting, which covers all other indirect emissions generated by the activities of the organisation, will be
implemented by the Company before mandatory reporting comes into effect in 2025.
Other Emissions to Air and Water
No other potential emissions to air and water associated with Deltic’s operations have been identified or reported.
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Financial Review
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All major expenditure in the last five years has been focussed
on the development of the Company’s portfolio of
conventional North Sea assets in accordance with the
Company’s investing policy, in addition to on-going
administrative expenditure.
Loss for the year
The Company incurred a loss for the year to 31 December
2021 of £1,935,052 (2020: £1,665,575), which includes a gain
of £298,173 (2020: nil) recognised on the farm out of Licence
P2428 (Cupertino Prospect), Licence P2567 (Cadence
Prospect) and Licences P2560/P2561/P2562 (Breagh South
Area) to Capricorn Energy PLC and is included as other
operating income in the Income Statement for the year.
A charge of £288,551 (2020: nil) is recognised resulting from
the write down on relinquished intangible assets following the
decision to relinquish Licences P2384 (Manhattan Prospect)
and P2424 (Cortez Prospect).
Administrative expenses of £1,912,987 (2020: £1,699,344)
were incurred during the year reflecting an increased level of
activity across the Company and its portfolio of assets.
Finance income of £2,905 (2020: £59,818) decreased due to
lower interest-bearing deposits on surplus funds. Finance
costs of £34,592 (2020: £26,049) represent the interest
charge on a lease liability recognised.
Financial position
The Company’s cash was £10,092,205 at 31 December 2021
(2020: £11,968,858) with the year-on-year decrease in cash
being explained below.
The increase in intangible assets to £2,203,118 (2020:
£1,430,915) reflects the development of the Company’s
exploration portfolio and in particular progress towards
drilling Licence P2252 (Pensacola Prospect), offset by the
relinquishment of P2384 (Manhattan Prospect) and P2424
(Cortez Prospect), and the gain recognised on the proceeds
from farm-out of Licences P2428 (Cupertino Area), P2567
(Cadence Prospect) and P2560/P2561/P2562 (Breagh South
Area). The Company was fully carried from the point of farm
out for costs associated with Licences P2428, P2567, P2560,
P2561 and P2562.
Property, plant and equipment of £385,240 (2020: £496,542)
includes a right of use asset relating to the office lease with a
net book value of £269,767 (2020: £350,697). Total current
liabilities, which include short-term creditors, accruals and
lease liabilities increased to £1,030,143 (2020: £246,041).
The decrease in total equity to £11,663,005 (2020:
£13,437,735) mainly represents the loss for the year and other
movements set out in the Statement of Changes in Equity.
expenditure on exploration assets, £5,895 (2020: £159,886)
relating to expenditure of property, plant and equipment, and
£719,953 (2020: nil) receipt of proceeds from exploration
licence farm-in, and interest received of £2,905 (2020:
£59,818). The net cash outflow from financing activities was
£116,815 (2020: £53,684), comprising the principal portion of
lease liabilities and interest paid.
Consequently, in the year to 31 December 2021, the Company
experienced a net cash outflow of £1,876,653 (2020:
£1,880,542).
Closing cash and cash equivalents
As at 31 December 2021, the Company held cash and cash
equivalents totalling £10,092,205 (2020: £11,968,858).
Shareholders’ equity
As at 31 December 2021, there were 1,405,964,855 (2020:
1,405,964,855) ordinary shares in issue. Additionally, a total of
up to 128,840,450 (2020: 94,840,450) new ordinary shares
may be issued pursuant to the exercise of share options.
Going concern
The Directors have assessed the Company’s ability to
continue as a going concern. Although the oil and gas
industry faces a period of change under the current
geopolitical environment, the Company does not anticipate
any negative issues impacting its ability to operate as a going
concern. Having taken the decision to raise funds in 2019 the
Company is currently well funded with no debt. Based on the
cash and cash equivalents balance at year end and the
Company’s commitments, the Directors are of the opinion
that the Company has adequate financial resources to meet
its committed Pensacola exploration programme, based upon
anticipated drilling costs per the planned work schedule, and
working capital requirements, and accordingly will be able to
continue and meet its liabilities as they fall due for a minimum
of 12 months from the date of signing these financial
statements.
Key performance indicators
At this stage in its development, the Company is focusing on
the development of its North Sea gas and oil assets, applying
for additional licences, maintaining and extending existing
licences, as well as the evaluation of various oil and gas
opportunities that may arise. The Directors closely monitor
and manage the levels of overheads and other administrative
expenditure, exploration expenditure, cash and deposit
balances, as set out above. As and when the Company’s
exploration licences move into production, other key
performance indictors (KPIs) will become relevant and will be
measured and reported as appropriate.
Cash flow
In the year to 31 December 2021, the net cash outflow from
operating activities was £1,623,057 (2020: £1,368,118). The net
cash outflow from investing activities was £136,781 (2020:
£458,740), comprising £853,744 (2020: £358,672) related to
Sarah McLeod
Chief Financial Officer
22 April 2022
14
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Business Risks
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Principal business risks
The Directors have identified the following current principal
risks in relation to the Company’s future performance. The
relative importance of risks faced by the Company can, and is
likely to change, with progress in the Company’s strategy and
developments in the external business environment. The
Directors have considered the potential impact of the
geopolitical environment and have concluded there are no
material risks associated to the Company. The Directors have
also considered whether the COVID pandemic presents a risk
to the business and have again concluded that the risks are
not significant.
Operational
Exploration and development risk
Activities within the Company’s licences may not result in
commercial development or otherwise realise value. There is
no certainty of success from the existing portfolio of licences.
The Company seeks to mitigate the exploration risk through
the experience and expertise of the Company’s specialists,
and the selection criteria used by the Company when
identifying prospective areas for licence applications. The
Company also has an objective to seek additional exploration
and development assets, in order to diversify the Company’s
portfolio of assets and hence risk.
Other business risks
In addition to the current principal risks identified above and
general business risks, the Company’s business is subject to
risks inherent in hydrocarbon exploration, development and
production activities. There are a number of potential risks
and uncertainties which could have a material impact on the
Company’s long-term performance and could cause actual
results to differ materially from expected and historical
results.
The Directors regularly monitor such risks, using information
obtained or developed from external and internal sources,
and will take actions as appropriate to mitigate these.
Effective risk mitigation may be critical to the Company in
achieving its strategic objectives and protecting its assets,
personnel and reputation. The Company assesses its risk on
an ongoing basis to ensure it identifies key business risks and
takes measures to mitigate these. Other steps include regular
Board review of the business, monthly management
reporting, financial operating procedures and anti-bribery
management systems. The Company reviews its business
risks and management systems on a regular basis, and
through this process, the Directors believe they have
identified the principal risks.
Financial
The Company’s core risk is that its ability to effectively
implement its business strategy and to continue as a going
concern over time depends on its ability to raise additional
funds. The need for and amount of any additional funds
required is currently unknown and will depend on numerous
factors related to the Company’s current and future activities.
The Company is likely to seek additional funds, through
equity, or partnership arrangements, as it has successfully
done in the past. There can be no assurance that any such
equity, debt or joint venture financing will be available to the
Company in a timely manner, on favourable terms, or at all.
Any additional equity financing will dilute current
shareholdings. If adequate funds are not available on
acceptable terms, the Company may not be able to take
advantage of opportunities, as well as possibly resulting in
the delay or indefinite postponement of the Company’s
activities. Following the fundraising in June 2019, the
Company is in a strong financial position for 2022 and
accordingly, the financial statements are prepared under a
going concern basis.
Strategic
Strategy risk
The Company’s strategy may not deliver the results expected
by shareholders. The Directors regularly monitor the
appropriateness of the strategy, taking into account both
internal and external factors, and the progress in
implementing the strategy, and modify the strategy as may
be required based on developments. Key elements of this
process are regular strategy reviews, monthly reporting, and
regular Board meetings.
Competition risk
The addition of exploration licences to the Company’s
portfolio is subject to competition from other companies.
Many of the Company’s larger competitors have greater
financial and technical resources and are able to devote more
to the development of their business. The Company mitigates
this risk by choosing where and when to deploy its business
development resources.
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Section 172 statement
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Section 172 of the Companies Act 2006 requires Directors to
take into consideration the interests of stakeholders and
other matters in their decision making. The Directors continue
to have regard to the interests of the Company's employees
and other stakeholders, the impact of its activities on the
community, the environment and the Company's reputation
for good business conduct, when making decisions. In this
context, acting in good faith and fairly, the Directors consider
what is most likely to promote the success of the Company
for its members in the long term. We explain in this annual
report, and reference below, how the Board engages with
stakeholders.
Likely consequence of any decision in the long term
The Chairman’s and Chief Executive's Statements at
pages 1–4 in this Annual Report, set out the Company's
long-term rationale and strategy.
Interests of Employees
The Company’s Corporate Governance Statement at
pages 18–20 of this Annual Report sets out under board
responsibilities the processes in place to safeguard the
interests of employees.
As a result of the work-from-home direction from the UK
Government that was in force for part of 2021, provision has
been made for remote-working by employees. The Board has
also considered how employee working practices will develop
beyond the COVID crisis - in particular, how more flexible and
efficient ways of working seen during 2020/2021 could be
retained.
Further information is also provided in the Environment
Social and Governance statement at pages 12–13 of this
Annual Report.
Foster business relationships with suppliers, joint venture
partners and others
Potential suppliers and joint venture partners are considered
in the light of their suitability to comply with the Company’s
policies.
Impact of operations on the community and environment
The Company has no current operations that impact upon
the community or environment. However, the Company has a
commitment to ensure future operations are conducted with
as limited as possible environmental impact.
The Company regularly reviews its Health, Safety &
Environment (‘HSE’) and other policies and works responsibly
with suppliers, and performance is monitored on an on-going
basis.
Maintain a reputation for high standards of business
conduct
The Corporate Governance section of this Annual Report at
pages 18–20 sets out the Board and Committee structures
and extensive board and committee meetings held during
2021, together with the experience of executive management
and the Board and the Company's policies and procedures.
Act fairly between stakeholders
The Board regularly reviews the Company’s principal
stakeholders and how it engages with them. This is achieved
through information provided by management and by direct
engagement with stakeholders themselves.
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Investing Policy
In addition to the development of the North Sea gas licences
the Company has acquired to date, the Company proposes
to continue to evaluate other potential oil and gas projects in
line with its investing policy, as it aims to build a portfolio of
resource assets and create value for shareholders. As
disclosed in the Company’s AIM Admission Document in May
2012, the Company’s substantially implemented Investment
Policy is as follows:
The proposed investments to be made by the Company may
be either quoted or unquoted; made by direct acquisition or
through farm-ins; either in companies, partnerships or joint
ventures; or direct interests in oil & gas and mining projects.
It is not intended to invest or trade in physical commodities
except where such physical commodities form part of a
producing asset. The Company’s equity interest in a
proposed investment may range from a minority position to
100% ownership.
The Board initially intends to focus on pursuing projects in
the oil & gas and mining sectors, where the Directors believe
that a number of opportunities exist to acquire interests in
attractive projects. Particular consideration will be given to
identifying investments which are, in the opinion of the
Directors, underperforming, undeveloped and/or
undervalued, and where the Directors believe that their
expertise and experience can be deployed to facilitate
growth and unlock inherent value.
The Company will conduct initial due diligence appraisals of
potential projects and, where it is believed further
investigation is warranted, will appoint appropriately qualified
persons to assist with this process. The Directors are currently
assessing various opportunities which may prove suitable
although, at this stage, only preliminary due diligence has
been undertaken.
It is likely that the Company’s financial resources will be
invested in either a small number of projects or one large
investment which may be deemed to be a reverse takeover
under the AIM Rules. In every case, the Directors intend to
mitigate risk by undertaking the appropriate due diligence
and transaction analysis. Any transaction constituting a
reverse takeover under the AIM Rules will also require
Shareholder approval.
Investments in early stage and exploration assets are
expected to be mainly in the form of equity, with debt being
raised later to fund the development of such assets.
Investments in later stage projects are more likely to include
an element of debt to equity gearing. Where the Company
builds a portfolio of related assets, it is possible that there
may be cross holdings between such assets.
The Company intends to be an involved and active investor.
Accordingly, where necessary, the Company may seek
participation in the management or representation on the
Board of an entity in which the Company invests with a view
to improving the performance and use of its assets in such
ways as should result in an upward re-rating of the value of
those assets.
Given the timeframe the Directors believe is required to fully
maximise the value of an exploration project or early stage
development asset, it is expected that the investment will be
held for the medium to long term, although disposal of assets
in the short term cannot be ruled out in exceptional
circumstances.
The Company intends to deliver Shareholder returns
principally through capital growth rather than capital
distribution via dividends, although it may become
appropriate to distribute funds to Shareholders once the
investment portfolio matures and production revenues are
established.
Given the nature of the Investing Policy, the Company does
not intend to make regular periodic disclosures or
calculations of its net asset value.
The Directors consider that as investments are made, and
new investment opportunities arise, further funding of the
Company will be required.
This strategic report contains certain forward-looking
statements that are subject to the usual risk factors and
uncertainties associated with the oil and gas exploration and
production business. Whilst the Directors believe the
expectation reflected herein to be reasonable in light of the
information available up to the time of their approval of this
report, the actual outcome may be materially different owing
to factors either beyond the Company’s control or otherwise
within the Company’s control but, for example, owing to a
change of plan or strategy. Accordingly, no reliance may be
placed on the forward-looking statements.
On behalf of the Board
Mark Lappin Graham Swindells
Chairman Chief Executive Officer
22 April 2022
22 April 2022
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Corporate Governance
Chairman’s Introduction
As Chairman of the Company, I provide leadership, ensuring that the Board is performing its role effectively, and has the
capacity, ability, structure and support to enable it to continue to do so.
As an AIM quoted company, the Company has chosen to follow the Quoted Companies Alliance’s (“QCA”) Corporate
Governance Code 2018 (the ‘QCA Code’) published in April 2018. The Board recognises the value and importance of high
standards of corporate governance and believes that this provides the most appropriate framework for a company of our size
and stage of development.
This Governance section of the Annual Report provides an update on our Corporate Governance policy, and includes the Audit
Committee Report, Remuneration Committee Report and the Directors’ Report. In these reports we set out our governance
structures and explain how we have applied the QCA Code and where we have departed from the code during the year. The
QCA Code is set out in detail on the Company’s website at www.delticenergy.com/investor-relations/corporate-governance,
including an explanation as to how the Company addresses the ten key governance principles defined in the QCA Code.
In May 2019, the Company appointed me as independent non-executive Chairman. My extensive Oil & Gas technical and
commercial experience including the three years I previously served as an independent non-executive director of the Company
underpin my effectiveness in this role, as the Company enters its next stage of development.
Corporate Governance Statement
Board responsibilities
The Board is responsible to the Company’s shareholders for the leadership, control and management of the Company. It is
responsible for the long-term success of the Company and for ensuring its appropriate management and operation in pursuit of
its objectives.
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The Board is in constant communication and meets regularly. Its responsibilities include:
Setting the Company’s strategy
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• Determining policies and values
• Establishing and maintaining the Company’s system of internal control and reviewing effectiveness annually
Identifying the major business risks faced by the Company and determining appropriate risk management
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Investing decisions
• Fundraising decisions
• Management appointments
Whilst there is a formal schedule of matters specifically reserved for approval by the Board, the two executive directors have
been given responsibility for specific functional aspects of the Company’s affairs.
The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Company’s activities. These
values are enshrined in the written policies and working practices adopted by all employees. An open culture is encouraged
within the Company, with regular communications to staff regarding progress and staff feedback being regularly sought. This is
especially important as a small company, in order to fully harness its human capital in pursuit of the effective development of
the Company’s assets, and so achieve the objectives and strategy set out in the Strategic Report and to seek to mitigate the
risks and uncertainties described in the Business Risks section of the Strategic Report. The executive directors work closely
with the small number of employees, so the Board is well placed to assess its culture. The Board are prepared to take
appropriate action against unethical behaviour, violation of company policies or misconduct.
Composition of the Board
The Board currently comprises five Directors, of whom two are executive and three are non-executive. The Directors are all
identified on page 23, together with a summary of their current and past experience, skills and personal qualities.
Non-executive Chairman
As Chairman, Mark Lappin oversees the adoption, delivery and communication of the Company’s corporate governance model
and is responsible for ensuring that it is maintained in line with appropriate practice and policies agreed by the Board. He is also
the Company’s leading ambassador, which includes presenting the Company’s aims and policies to investors and other outside
parties. He promotes active communication with shareholders and other stakeholders, including speaking regularly with
investors and other stakeholders. He chairs the AGM and as chairman of the Board, he chairs Board meetings, ensuring that the
Board regularly reviews the Company’s strategy. He also oversees the composition and structure of the Board which involves
regularly reviewing the overall size of the Board, the balance between executive and non-executive, age, experience, skills and
personalities of the Directors.
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Corporate Governance
continued
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Non-executive Directors
The three Non-executive Directors (Mark Lappin, Peter Cowley and Peter Nicol) have a responsibility to challenge
independently and constructively the performance of management and to help develop proposals on strategy. They each sit on
the Remuneration and Audit committees, enabling them to have a role in determining the pay and benefits of the executive
directors, to review internal control and financial reporting matters, and to have a direct relationship with the external auditors.
Independence and Commitments
The three Non-executive Directors are considered by the Board to be independent of management. The Board believes that
they continue to demonstrate an independence of character in the performance of their roles as Non-executive Directors. Their
director’s fees are fixed, and they do not benefit from share option awards.
The Directors are expected to attend Board meetings, meetings of Board Committees of which they are members, annual
general meetings, and any other shareholder meetings convened from time to time.
All Directors have disclosed any significant commitments outside their respective duties as Directors and confirmed that they
have sufficient time to discharge their duties.
Appointments
The Board believes there is an appropriate balance of skills, knowledge and personal qualities on the Board, which provides a
wide range of expertise on issues relating to the Company’s mission, operations, strategies and its standards of conduct. The
Chairman of the Board monitors the suitability of the Board’s composition on a continuing basis and will make
recommendations to the Board as and when appropriate.
Board support and external advice
Internal management is available to the Board to ensure all Board and Committee meetings are conducted properly and
procedures are in place for distributing meeting agendas and reports so that the Directors receive the appropriate information
to be discussed in a timely manner. The Directors each receive reports which include monthly finance and management results
and operational updates from the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer. Board
minutes are taken by internal management and circulated for approval at the next meeting. The Company Secretary assists the
Board by maintaining statutory registers and filings and assisting with organising shareholder general meetings.
Aside from the Directors’ stated roles, the Board members do not have any particular internal advisory responsibilities. Where it
considers it necessary to do so, the Board and Board committees may utilise external professional advisers to provide advice
and guidance on any matter where they consider it prudent to seek such advice, at the Company’s expense. No such external
advice was sought during the year.
Board performance evaluation
The Board evaluates its performance as a whole, informally on an ongoing basis. This falls under the overall responsibility of the
Chairman, taking into account the Financial Reporting Council’s Guidance on Board Effectiveness. There have been no
recommendations concerning the Board structure arising from the Company’s Board appraisals over the year ended
31 December 2021.
Board meetings
The Board meets formally a minimum of eleven times a year, excluding Board committee meetings. The table below sets out
the total number of meetings held by the Board and its Committees and records of attendance by each member eligible to
attend during the year ended 31 December 2021:
Board meetings Audit committee1 Remuneration committee1
Possible Attended Possible Attended Possible Attended
G C Swindells 12 12 2 2 – –
A J Nunn 12 12 – – – –
S M McLeod 12 8 2 2 – –
P N Cowley 12 12 2 2 4 4
M S Lappin 12 12 2 2 4 4
P W Nicol2 2 2 1 1 2 2
1 Only Non-executive Directors are entitled to vote in the meetings of these Board Committees.
2 Appointed on 17 November 2021.
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Corporate Governance
continued
Other senior members of the management team and external advisors will attend, at the invitation of the Board, and as
appropriate to the matters under discussion.
Board committees
The Board has established an audit committee, remuneration committee and AIM compliance committee with formally
delegated duties and responsibilities, as described below. Each committee’s terms of reference are included on the Company’s
website.
Audit committee
The audit committee is responsible for monitoring the integrity of the Company’s financial statements, reviewing significant
financial reporting issues, reviewing the effectiveness of the Company’s internal control and risk management systems,
monitoring the effectiveness of the internal audit function and overseeing the relationship with the external auditors (including
advising on their appointment, agreeing the scope of the audit and reviewing the audit findings).
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The audit committee comprises Peter Nicol, Peter Cowley and Mark Lappin and was chaired by Peter Cowley until 17 November
2021 when Peter Nicol was appointed as the chair. The audit committee aims to meet at appropriate times in the reporting and
audit cycle and otherwise as required. The audit committee also meets regularly with the Company’s external auditors.
Remuneration committee
The remuneration committee is responsible for determining and agreeing with the Board the framework for the remuneration
of the Chairman and the executive directors and, within the terms of the agreed framework, determining the total individual
remuneration packages of such persons including, where appropriate, bonuses, incentive payments and share options or other
share awards. The remuneration of Non-executive Directors is a matter for the chairman and the executive members of the
Board. No Director is involved in any decision as to his or her own remuneration.
The remuneration committee comprises Peter Cowley, Peter Nicol and Mark Lappin and is chaired by Peter Cowley. The
remuneration committee meets at least twice a year and otherwise as required.
AIM compliance committee
The AIM compliance committee is responsible for ensuring that the Company complies with its obligations under the AIM Rules
for Companies (“AIM Rules”) and the Market Abuse Regulation (Regulation EU 596/2014) (“MAR”) and, in particular makes
timely and accurate disclosure of all information that is required to be disclosed to meet its disclosure obligations arising from
the admission of its shares to trading on AIM and, under MAR.
The AIM compliance committee comprises Graham Swindells, Mark Lappin, Andrew Nunn and Sarah McLeod. The AIM
compliance committee meets as and when required, in order to undertake its responsibilities.
Share dealing code
The Company has adopted a share dealing code for the Directors, persons discharging managerial responsibilities and
applicable employees of the Company for the purpose of ensuring compliance by such persons with the provisions of the AIM
Rules relating to dealings in the Company’s securities (including, in particular, Rule 21 of the AIM Rules and MAR). The Directors
consider that this share dealing code is appropriate for a company whose shares are admitted to trading on AIM.
On behalf of the Board
Mark Lappin
Chairman
22 April 2022
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Audit Committee Report
Overview
The audit committee met twice during the year. The external auditor, BDO LLP, also attended the meetings at the invitation of
the audit committee chairman.
Financial reporting
The audit committee monitored the integrity of the annual financial statements and reviewed the significant financial reporting
issues and accounting policies and disclosures in the financial reports. The external auditor attended the audit committee
meetings as part of the full year accounts approval process. The process included the consideration of reports from the external
auditor identifying the primary areas of accounting judgements and key audit risks identified as being significant to the 2021
financial statements.
Audit committee effectiveness
Although no formal review of the effectiveness of the audit committee has been undertaken, the Board and the chairman of the
audit committee believe this to be satisfactory. The chairman of the audit committee will continue to assess whether such a
formal review would be appropriate or otherwise, however, it is currently not considered necessary.
External audit
The audit committee is responsible for managing the relationship with BDO LLP, the Company’s external auditor since being
appointed in 2012. The objectivity and independence of the external auditors is safeguarded by reviewing the auditors’ formal
declarations, monitoring relationships between key audit staff and the Company and reviewing the non-audit fees payable to
the auditor. Non-audit services are not performed by the auditor if this would have a material effect on, or relevance to, the
production of the Company’s financial statements and/or involve taking decisions or making significant subjective judgements
that should be the responsibility of management. During the year, amounts paid to BDO LLP for audit services totalled £35,500
(2020: £22,500) and £2,000 (2020: £3,495) for non-audit services. These non-audit services were performed by a team
separate from the audit team, did not involve any subjective judgements and a member of the Company’s management was
identified as taking responsibility for the services provided.
Internal audit
In light of the size of the Company and its current stage of development, the committee did not consider it necessary or
appropriate to operate an internal audit function during the year.
Peter Nicol
Chairman, Audit committee
22 April 2022
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Remuneration Committee Report
The remuneration committee reviews the scale and structure of the executive directors’ remuneration and the terms of their
service contracts.
The remuneration and terms and conditions of appointment of the Non-executive Directors are set by the Board.
The remuneration committee met four times during 2021 in consideration of: changes in remuneration, share option awards,
bonus awards and 2021 objectives.
During the year there were no changes to the Company’s pay and employment conditions and all director salary changes and
bonuses were approved by the remuneration committee. A major independent, executive reward company, Mercer Kepler
undertook a benchmarking exercise during 2019 on the Company’s senior executive and board’s remuneration and this was
used in determining appropriate salaries and bonuses.
Although no formal review of the effectiveness of the remuneration committee has been undertaken, the Board and the
chairman of the remuneration committee believe this to be satisfactory. The chairman of the remuneration committee will
continue to assess whether such a formal review would be appropriate or otherwise.
Peter Cowley
Chairman, Remuneration committee
22 April 2022
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Board of Directors and Senior Management
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There is an appropriate breadth of experience, skills and personal qualities covering the key aspects of the business including
technical, operational and financial. It is the responsibility of each Director to keep skills up to date with the assistance of the
Chairman who has a core responsibility in addressing the development needs of the Board as a whole, with a view to enhancing
its overall effectiveness.
Mark Lappin
Non-Executive Chairman
Mark has more than 35 years of experience in the oil and gas
industry. Mark joined Deltic Energy as non-executive director
in 2016 and became Chairman in May 2019. Prior to that Mark
was Technical Director at Cuadrilla and Subsurface Director
for UK and Netherlands at Centrica. Mark began his career at
Phillips Petroleum and has held senior technical and
commercial roles with ExxonMobil and Dart Energy. Mark is
also a Visiting Professor at University of Strathclyde Centre
for Energy Policy in Glasgow.
Mark’s extensive technical, commercial and senior management
experience in the oil and gas sector ensures that he has the
ability to support the executive directors, challenge strategy
and decision-making, scrutinise performance and to perform his
role as Non-Executive Chairman as the Company enters its next
stage of development. Mark is also a member of the Company’s
audit, remuneration and AIM compliance committees.
Graham Swindells
Chief Executive Officer
Graham Swindells joined the Company in 2013 as Chief
Financial Officer and became Chief Executive Officer in 2018.
He joined the Company from Ernst & Young where he was a
Director in Public Company M&A. Graham graduated from the
University of Glasgow with a Bachelor of Accountancy
Degree and after qualifying as a Chartered Accountant spent
two years at PricewaterhouseCoopers specialising in
corporate recovery and restructuring. He subsequently
specialised in corporate finance, becoming a director in
corporate finance at Arbuthnot Securities during which time
he focused on advising and broking small and mid-cap public
companies across various sectors, but with a particular focus
on natural resources. Graham is chairman of the Company’s
AIM compliance committee.
Graham’s professional, commercial and finance experience
ensures that he has the necessary ability to develop and
implement the Company’s strategy, undertake fundraising,
and oversee the management of the Company.
Andrew Nunn
Chief Operating Officer
Andrew Nunn joined the Company in 2014 and later that year
was appointed to the Board as Chief Operating Officer.
Andrew is a Chartered Geologist with over 20 years of
experience working on exploration, mining and geo-
environmental projects in Europe, Australasia and Africa. For
the last 10 years he has worked on a wide variety of UK and
European conventional and unconventional gas projects with
a primary focus on Carboniferous aged reservoirs. Andrew’s
previous role was as Exploration Manager for Dart Energy. He
holds a B.Sc. (Hons) in Economic Geology and an M.Sc. in
Environmental Management. Andrew became a Director of
the Oil and Gas Independents’ Association (OGIA) in
February 2020. Andrew is a member of the Company’s AIM
compliance committee.
Andrew’s technical and operational experience and
professional qualifications ensure that he has the necessary
ability to lead and manage the Company’s technical
development and operational matters.
Sarah McLeod
Chief Financial Officer
Sarah joined Deltic as Chief Financial Officer in January 2020.
Sarah has 20 years of experience in the international oil and
gas industry. She previously held the position of Group
Financial Controller at New Age. Sarah spent 10 years with
ConocoPhillips in a variety of senior financial and strategic
roles and also two years with Maersk Oil. She started her
career with Deloitte, spending six years in its oil and gas team
during which time she qualified as a Chartered Accountant.
Sarah’s professional qualifications, finance and industry
experience ensures that she has the necessary ability to
manage the Company’s financial matters.
Peter Cowley
Non-Executive Director
Peter Cowley is a geologist with over 50 years of international
experience in the minerals industry and has been involved in
the discovery and development of a number of gold mines in
Africa. Peter was previously Managing Director of Ashanti
Exploration Limited, Group Technical Director of Cluff
Resources Plc, CEO of Banro Corporation and is currently
President and a Director of Loncor Resources Inc. He holds
M.Sc. and M.B.A. degrees and is a Fellow of I.M.M.M. Peter is
chairman of the Company’s Remuneration Committee and
member of the Audit Committee.
Peter’s many years of technical experience and senior
management positions in publicly listed companies ensure
that he has the ability to support the executive directors,
challenge strategy and decision-making, and to scrutinise
performance.
Peter Nicol
Non-Executive Director
Peter Nicol joined the Company on 17th November 2021.
Peter has 40 years of experience in the energy sector. He was
previously Head of Oil & Gas at GMP Securities Europe, Global
Sector Director of Oil & Gas Research at ABN Amro & Head of
European Oil & Gas Research at Goldman Sachs. Peter is a
non-executive director of exploration focussed Touchstone
Exploration Inc. and Eco (Atlantic) Oil & Gas Ltd, both of
which are AIM quoted. He is also an independent director of
ERC Equipoise Limited. Peter started his career with British
National Oil Corporation and holds a Bachelor of Science in
Mathematics & Economics from Strathclyde University. Peter
is chairman of the Company’s Audit Committee and member
of the Remuneration Committee.
Peter’s wealth of energy, financial, city and public company
experience will be invaluable to Deltic as it progresses to the
next stage in development, and ensures he has the ability to
support the executive directors, challenge strategy and
decision-making, and to scrutinise performance.
Deltic Energy Plc Annual Report & Accounts 2021 23
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Report of the Directors
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The Directors present their report with the financial statements of the Company for the year ending 31 December 2021.
Principal Activity
The Company’s principal activity is the exploration, evaluation and development of mineral exploration targets, with a principal
focus on the development of its gas and oil licences in the Southern and Central North Sea.
Review of Business
The Company changed its name in the prior year from Cluff Natural Resources Plc to Deltic Energy Plc.
Further details of the Company’s business and expected future development are also set out in the Strategic Report starting on
page 1, commencing with the Chairman’s Statement.
Dividends
No dividends will be distributed for the year ended 31 December 2021 (2020: nil).
Directors
The Directors of the Company during the year and their beneficial interest in the ordinary shares and share options of the
Company at 31 December 2021 are set out below:
Ordinary shares Share options
2021 2020 2021 2020
G C Swindells 2,394,836 2,394,836 48,654,096 38,654,096
A J Nunn 806,724 806,724 48,654,096 38,654,096
M S Lappin 1,174,887 1,174,887 – –
P N Cowley 1,018,489 1,018,489 – –
P W Nicol – – – –
5,394,936 5,394,936 97,308,192 77,308,192
Director’s Remuneration
The following table sets out an analysis of the pre-tax remuneration for the year ended 31 December 2021 for the individual
Directors who held office in the Company during the year.
2021 2021 2021 2021 2021 2020
Salaries Bonus Benefits
and fees payments Pension in Kind Total Total
£ £ £ £ £ £
G C Swindells 214,101 113,201 21,410 4,639 353,351 260,500
A J Nunn 200,725 106,128 20,073 2,829 329,755 245,468
M S Lappin 50,000 – – – 50,000 49,166
P N Cowley 25,417 – – – 25,417 24,583
P W Nicol 3,654 – – – 3,654 –
492,897 219,329 41,483 7,468 762,177 579,717
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Report of the Directors
continued
Share options
The share-based payment of £140,192 (2020: £126,404) to Directors represents the share-based expense relating to unvested
share options during the year.
The following share options table comprises share options held by Directors who held office during the year ended 31
December 2021:
Options held at Options Options Options held at
31 December granted exercised 31 December Exercise Exercisable Exercisable
2020 in period in period 2021 price (p) from to
G C Swindells – 10,000,000 – 10,000,000 2.05 22 Sept 2022 22 Sept 2031
20,000,000 – – 20,000,000 1.75 8 July 2022 8 July 2029
9,000,000 – – 9,000,000 2.32 7 June 2019 7 June 2028
2,200,000 – – 2,200,000 3.75 30 April 2015 30 April 2024
7,454,096 – – 7,454,096 1.325 10 June 2017 10 June 2026
A J Nunn – 10,000,000 – 10,000,000 2.05 22 Sept 2022 22 Sept 2031
20,000,000 – – 20,000,000 1.75 8 July 2022 8 July 2029
8,200,000 – – 8,200,000 2.32 7 June 2019 7 June 2028
3,000,000 – – 3,000,000 3.88 6 Sept 2015 22 May 2024
7,454,096 – – 7,454,096 1.325 10 June 2017 10 June 2026
Further details of share-based payments are set out in note 21.
Financial Instruments
Details of the use of financial instruments by the Company are contained in the Strategic Report and note 19 of the financial
statements.
Subsequent Events
Events subsequent to 31 December 2021 are set out in note 22 to the financial statements on page 53.
Business Risks
A summary of the principal and general business risks can be found in the Strategic Report on page 15 and in note 19 to the
financial statements.
Key Performance Indicators
At this stage in its development, the Company is focusing on the development of its North Sea gas and oil assets, applying for
new licences, maintaining and extending existing licences, as well as the evaluation of various oil and gas opportunities. The
Directors closely monitor certain financial information, in particular the levels of overheads and other administrative
expenditure, exploration expenditure and cash and deposit balances, as set out in the Financial Review. As and when the
Company moves into production, other financial, operational, health and safety and environmental KPIs will become relevant
and will be measured and reported as appropriate.
Disclosure of Information to Auditors
So far as the Directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006)
of which the Company’s auditors are unaware, and each Director has taken all the steps that he ought to have taken as a
director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are
aware of that information.
Auditors
The auditors, BDO LLP, have expressed their willingness to continue in office as auditors, and a resolution to re-appoint them
will be proposed at the Annual General Meeting.
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On behalf of the Board
Graham Swindells
Chief Executive Officer
22 April 2022
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Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual 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 the Directors have
elected to prepare the financial statements in accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006. 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. The Directors are also required to prepare financial statements in accordance with the rules of the
London Stock Exchange for companies trading securities on the Alternative Investment Market (AIM).
In preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and accounting estimates that are reasonable and prudent;
• State whether they have been prepared in accordance with UK adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006;
• Subject to any material departures disclosed and explained in the financial statements; and
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the 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 are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website.
Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also
extends to the on-going integrity of the financial statements contained therein.
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Independent Auditor’s Report
to the members of Deltic Energy Plc
Opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 December 2021 and its loss for the year then ended;
• have been properly prepared in accordance with UK adopted international accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Deltic Energy Plc (the ‘Company’) for the year ended 31 December 2021 which
comprise the Income Statement, the Statement of Other Comprehensive Income, the Balance Sheet, the Statement of Changes
in Equity, the Statement of Cash Flows and the 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 UK adopted
international accounting standards.
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We remain independent of Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
We have determined going concern to be a key audit matter and our response to this and our evaluation of the Directors’
assessment of the Company’s ability to continue to adopt the going concern basis of accounting is disclosed in the key audit
matters section of this report.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
Overview
2021 2020
Carrying amount of ✓ ✓
exploration and assets
Key audit matters Going concern ✓ ✗
Materiality Financial statements as a whole
£130,000 based on 1% of total assets (2020: £60,000 based on 1.75% of total
assets, adjusted for cash balances outside working capital requirements.)
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of
internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of
management override of internal controls, including assessing whether there was evidence of bias by the Directors that may
have represented a risk of material misstatement.
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Independent Auditor’s Report
continued
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, including those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter
Carrying amount of
exploration and evaluation
assets
Refer to accounting policy on
page 39 and disclosure in note
10
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During 2021, the Company
announced farm-out
agreements with Capricorn
Energy Plc in respect of its
licences P2428, P2567, P2560,
P2561 and P2562 as described
in note 10.
The Company announced
during 2021 that it would
relinquish licences P2384 and
P2424. Management
accordingly recognised a write
down of the full amount of
costs capitalised in association
with these licenses (note 10).
Management’s impairment
review at the reporting date
did not note any further
indications of impairment.
Given the inherent judgement
involved in the assessment of
whether there are indications
of impairment to the carrying
amount of exploration and
evaluation assets, we
considered the carrying
amount of exploration assets
to be a key audit matter.
How the scope of our audit addressed the key audit matter
• We reviewed the licence documentation to satisfy ourselves
that the licences remained valid at 31 December 2021, as
well as confirmed the dates of expiry and licence
obligations.
• We checked the agreements with Capricorn in respect of
licences P2428, P2567, P2560, P2561 and P2562 to confirm
the terms of the farm out agreements. The accounting
entries made to intangible assets and to the statement of
comprehensive income regarding the gain on farm-out
were reviewed for compliance with the Company’s
accounting policy.
• We evaluated the impairment review by considering factors
such as: the licence status and expiry date together with
the history of licence extensions; the required work
programme including the associated commitments and
obligations; and internal and external feasibility studies.
• We considered the progress of the Company’s technical
work to date on its licences, together with planned and
budgeted works, against the licence extension obligations
and due dates.
• We obtained evidence to confirm the relinquishment of
licences P2384 and P2424 during the year, and reviewed
the appropriateness of the accounting entries made to
intangible assets and the impairment charge to the
statement of comprehensive income.
Key observations:
We found management’s assessment that there were no
indicators of impairment at the reporting date to be
appropriate.
We consider the recognition and amount of the write down of
costs recognised in respect of licences P2384 and P2424 to be
appropriate.
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Independent Auditor’s Report
continued
Key audit matter
Going concern
(Refer to disclosure on
page 37)
How the scope of our audit addressed the key audit matter
The Company is in the
exploration phase of its
licenses and is not currently
generating revenue.
• We obtained the Directors formal assessment of the
Company’s going concern position, which included cash
flow forecasts for the period up to 30 June 2023.
• We compared the Company’s plans for exploration
Accordingly the Directors
must assess whether the
Company has sufficient cash
balances to meet the cost of
its operations for at least
twelve months from the date
of approval of the financial
statements.
We have highlighted going
concern as a key audit matter
as a result of the estimates
and judgements required to
be made by the Directors in
their going concern
assessment and the effect on
our audit strategy.
activities as stated in their assessment against the
information obtained from discussion with the Company’s
senior geological staff.
• We reviewed the terms of the Company’s exploration
licenses for any committed works.
• Planned costs for general and administrative expenditure
were compared to prior year actual costs, and expected
developments.
• The sensitivity of cash flows included in the forecast was
reviewed, in particular the potential for overrun on the
expected share of well drilling costs for the Pensacola well.
• We checked that, other than the Pensacola well drilling,
planned exploration costs which are not included in the
forecast are discretionary.
• We discussed the impact of the ongoing Covid 19
pandemic, with the Directors.
Key observations:
These are set out in the Conclusions related to going concern
section of our audit report.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
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Independent Auditor’s Report
continued
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Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Parent company financial statements
2021 2020
Materiality £130,000 £60,000
Basis for determining materiality
Rationale for the benchmark applied
Based on 1% of total assets. We
have not included an adjustment
to the cash balances in the current
year, as the balances are expected
to be used for working capital
requirements.
Based on 1.75% of total assets,
adjusted for cash balances outside
of working capital requirements’.
We consider total assets to be the
financial metric of the most interest
to shareholders and other users of
the financial statements given the
Company’s status as an oil and gas
exploration company and therefore
consider this to be an appropriate
basis for materiality.
We consider total assets to be the
financial metric of the most interest
to shareholders and other users of
the financial statements given the
Company’s status as an oil and gas
exploration company and therefore
consider this to be an appropriate
basis for materiality.
Performance materiality
£97,500
£45,000
Basis for determining performance materiality
75% of materiality for the financial
statements as a whole. This is
based on our overall assessment of
the control environment and the
low level of expected
misstatements.
75% of materiality for the financial
statements as a whole. This is
based on our overall assessment of
the control environment and the
low level of expected
misstatements.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £6,500 (2020:
£3,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative
grounds.
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. Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
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Independent Auditor’s Report
continued
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In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the Directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept or returns adequate for our audit have not been received from branches
not visited by us; or
• the financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the 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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to
which our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company. We determined
that the most significant which are directly relevant to specific assertions in the financial statements are those related to the
reporting framework (UK adopted international accounting standards, the Companies Act 2006. AIM rules and the QCA
Corporate Governance Code), and terms and requirements included in the Company’s exploration and evaluation licences.
• We gained an understanding of how the Company is complying with those legal and regulatory frameworks by making
inquires to management, and those responsible for legal and compliance procedures. We corroborated our inquires through
our review of board minutes and other supporting documentation.
• We performed procedures to verify the title and carrying value of Company’s exploration licences as described in the Key
Audit Matter.
• We tested the appropriateness of journal entries made throughout the year by applying specific criteria to detect possible
irregularities or fraud.
• We assessed and challenged key areas of judgement and estimation made by management, including their assessment of
the going concern position of the Company, and their assessment of indications of impairment to the Company’s
exploration and evaluation assets.
• We communicated identified laws and regulations throughout our team, and remained alert to any indication of non-
compliance throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, 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 by, for example, forgery, misrepresentations or through collusion. There are
inherent limitations in the audit procedures performed 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 are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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Independent Auditor’s Report
continued
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’s members as a body, for our audit work, for this report, or for the
opinions we have formed.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
22 April 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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Deltic Energy Plc Annual Report & Accounts 2021
Income Statement
for the year ended 31 December 2021
2021 2020
Continuing operations Notes £ £
Administrative expenses:
Write down on relinquished intangible assets 10 (288,551) -
Other administrative expenses (1,912,987) (1,699,344)
Total administrative expenses (2,201,538) (1,699,344)
Other operating income 10 298,173 -
Operating loss (1,903,365) (1,699,344)
Finance income 4 2,905 59,818
Finance costs 5 (34,592) (26,049)
Loss before tax 6 (1,935,052) (1,665,575)
Income tax expense 8 - -
Loss for the year (1,935,052) (1,665,575)
Loss per share from continuing operations
expressed in pence per share:
Basic 9 (0.14)p (0.12)p
Statement of Comprehensive Income
for the year ended 31 December 2021
2021 2020
£ £
Loss for the year (1,935,052) (1,665,575)
Other comprehensive income - -
Total comprehensive expense for the year attributable to the equity holders of the Company (1,935,052) (1,665,575)
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The notes on pages 37 to 53 form part of the financial statements.
Deltic Energy Plc Annual Report & Accounts 2021 33
Balance Sheet
as at 31 December 2021
2021 2020
Notes £ £
Assets
Non-current assets
Intangible assets 10 2,203,118 1,430,915
Property, plant and equipment 11 385,240 496,542
Other receivables 12 37,422 37,422
Total non-current assets 2,625,780 1,964,879
Current assets
Trade and other receivables 12 190,398 53,887
Cash and cash equivalents 10,092,205 11,968,858
Total current assets 10,282,603 12,022,745
Total assets 12,908,383 13,987,624
Capital and reserves attributable to the equity holders of the Company
Shareholders’ equity
Share capital 13 7,029,824 7,029,824
Share premium 20,296,030 20,296,030
Share-based payment reserve 21 1,150,700 990,378
Accumulated retained deficit (16,813,549) (14,878,497)
Total equity 11,663,005 13,437,735
Liabilities
Current liabilities
Trade and other payables 15 931,148 153,436
Lease liabilities 17 98,995 92,605
Total current liabilities 1,030,143 246,041
Non-current liabilities
Lease liabilities 17 215,235 303,848
Total non-current liabilities 215,235 303,848
Total liabilities 1,245,378 549,889
Total equity and liabilities 12,908,383 13,987,624
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The financial statements of Deltic Energy Plc, registered number 7958581, were approved by the Board of Directors on 22 April
2022 and were signed on its behalf by:
Graham Swindells
Chief Executive Officer
The notes on pages 37 to 53 form part of the financial statements.
34
Deltic Energy Plc Annual Report & Accounts 2021
Statement of Changes in Equity
for the year ended 31 December 2021
Share-based Accumulated
Share Share payment retained Total
capital premium reserve deficit equity
£ £ £ £ £
Balance at 1 January 2021 7,029,824 20,296,030 990,378 (14,878,497) 13,437,735
Comprehensive income for the year
Loss for the year - - - (1,935,052) (1,935,052)
Total comprehensive loss for the year - - - (1,935,052) (1,935,052)
Contributions by and distributions to owners
Share-based payment - - 160,322 - 160,322
Total contributions by and distributions to owners - - 160,322 - 160,322
Balance at 31 December 2021 7,029,824 20,296,030 1,150,700 (16,813,549) 11,663,005
Balance at 1 January 2020 7,029,824 20,296,030 842,644 (13,212,922) 14,955,576
Comprehensive income for the year
Loss for the year - - - (1,665,575) (1,665,575)
Total comprehensive loss for the year - - - (1,665,575) (1,665,575)
Contributions by and distributions to owners
Share-based payment - - 147,734 - 147,734
Total contributions by and distributions to owners - - 147,734 - 147,734
Balance at 31 December 2020 7,029,824 20,296,030 990,378 (14,878,497) 13,437,735
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The notes on pages 37 to 53 form part of the financial statements.
Deltic Energy Plc Annual Report & Accounts 2021 35
Statement of Cash Flows
for the year ended 31 December 2021
2021 2020
£ £
Cash flows from operating activities
Loss before tax (1,935,052) (1,665,575)
Finance income (2,905) (59,818)
Finance costs 34,592 26,049
Gain from farm-out of licence interest (298,173) 2,783
Depreciation 115,355 106,029
Amortisation 5,625 6,712
Loss on disposal of property, plant and equipment 1,842 -
Write down on relinquished intangible assets 288,551 -
Share-based payment 160,322 147,734
(1,629,843) (1,436,086)
Decrease/(increase) in other receivables (136,511) 38,269
Increase in trade and other payables 143,297 29,699
Net cash outflow from operating activities (1,623,057) (1,368,118)
Cash flows from investing activities
Purchase of intangible assets (853,744) (358,672)
Purchase of property, plant and equipment (5,895) (190,108)
Property, plant & equipment landlord contributions - 30,222
Proceeds from exploration licence farm-in 719,953 -
Interest received 2,905 59,818
Net cash outflow from investing activities (136,781) (458,740)
Cash flows from financing activities
Payment of principal portion of lease liabilities (82,223) (27,635)
Interest paid (34,592) (26,049)
Net cash outflow from financing activities (116,815) (53,684)
Decrease cash and cash equivalents (1,876,653) (1,880,542)
Cash and cash equivalents at beginning of year 11,968,858 13,849,400
Cash and cash equivalents at end of year 10,092,205 11,968,858
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The notes on pages 37 to 53 form part of the financial statements.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
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1. Accounting Policies
Basis of preparation
The financial statements have been prepared in accordance with UK adopted International Accounting Standards (‘IAS’), as
adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under International
Financial Reporting Standards ('IFRS').
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under
the circumstance, the result of which form the basis of making judgements about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from this estimate. The areas involving a higher degree of
judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed later in
this note.
Operating loss is stated after charging and crediting all items excluding finance income and expenses.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision only affects that period or in the period of revision and
future periods if the revision affects both current and future periods.
Going concern
The Directors have assessed the Company’s ability to continue as a going concern. Although the oil and gas industry faces a
period of change under the current geopolitical environment, the Company does not anticipate any negative issues impacting
its ability to operate as a going concern. Having taken the decision to raise funds in 2019 the Company is currently well funded
with no debt. Based on the cash and cash equivalents balance at year end and the Company’s commitments, the Directors are
of the opinion that the Company has adequate financial resources to meet its committed Pensacola exploration programme,
based upon anticipated drilling costs per the planned work schedule, and working capital requirements, and accordingly will be
able to continue and meet its liabilities as they fall due for a minimum of 12 months from the date of signing these financial
statements.
Adoption of new and revised International Financial Reporting Standards
The Company has adopted the following standards, amendments to standards and interpretations which are effective for the
first time this year. These have not had a material effect on the reported income or net assets of the Company.
Effective period
commencing on or after:
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 1 January 2021
Amendment to IFRS 16: Covid 19- Related Rent Concessions 1 June 2020
Standards effective in future periods
Certain new standards, amendments and interpretations to existing standards have been published that are relevant to the
Company’s activities and are mandatory for the Company’s accounting periods commencing after 1 January 2022 or later
periods and which the Company has decided not to early adopt. These include:
Effective period
commencing on or after:
Amendments to IAS 1: Classification of Liabilities as Current or Non-current & Disclosures of
Accounting Policies 1 January 2024
Amendments to IAS 8: Definition of Accounting Estimates 1 January 2023
Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment;
IAS 37 Provisions, Contingent Liabilities and Contingent Assets; Annual Improvements 2018-2020 1 January 2022
Management anticipates that all relevant pronouncements will be adopted in the Company's accounting policies for the first
period beginning after the effective date of the pronouncement.
There are no standards and interpretations in issue but not yet adopted that the Directors anticipate will have a material effect
on the reported income or net assets of the Company for the year ended 31 December 2022 based on current activities.
Deltic Energy Plc Annual Report & Accounts 2021
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
1. Accounting Policies (continued)
Share-based payments
Equity-settled share-based payments to employees and Directors are measured at the fair value of the equity instrument. The
fair value of the equity-settled transactions with employees and Directors is recognised as an expense over the vesting period.
The fair value of the equity instruments is determined at the date of grant, taking into account market-based vesting conditions
and non-vesting conditions. The fair value of goods and services received is measured by reference to the fair value of options.
The fair values of share options are measured using an appropriate valuation methodology. The expected life used in the
models is adjusted, based on management’s best estimate of the effects of non-transferability, exercise restrictions and
behavioural considerations.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees (or other
beneficiaries) become fully entitled to the award (“the vesting date”).
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will
ultimately vest.
The Income Statement charge or credit for a period represents the movement in cumulative expense recognised as at the
beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting
condition is satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an equity-
settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An
additional expense is recognised for any modification, which increases the total fair value of the share-based payment
arrangement or is otherwise beneficial to the employee, as measured at the date of modification.
Where an equity-settled award (share options) is cancelled, it is treated as if it had vested on the date of cancellation if it had
not yet fully vested, and any expense not yet recognised for the award is recognised immediately. However, if a new award is
substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and
new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is credited to the
Income Statement. Upon expiry of an equity-settled award, the cumulative charge expensed is transferred from the Share-
based payment reserve to the Accumulated retained deficit.
Impairment of exploration assets
Exploration and evaluation assets are reviewed regularly for indicators of impairment following the guidance in IFRS 6
‘Exploration for and Evaluation of Mineral Resources’ and tested for impairment where such indicators exist.
In accordance with IFRS 6 the Company considers the following facts and circumstances in their assessment of whether the
Company’s exploration and evaluation assets may be impaired:
• Whether the period for which the Company has the right to explore in a specific area has expired during the period or will
expire in the near future, and is not expected to be renewed;
• Whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither
budgeted nor planned;
• Whether exploration for and evaluation of reserves in a specific area have not led to the discovery of commercially viable
quantities of mineable material and the Company has decided to discontinue such activities in the specific area; and
• Whether sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying
amount of the exploration and evaluation assets is unlikely to be recovered in full, from successful development or by sale.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
1. Accounting Policies (continued)
If any such facts or circumstances are noted, the Company, as a next step, perform an impairment test in accordance with the
provisions of IAS 36. In such circumstances the aggregate carrying value of the exploration and evaluation asset is compared
against the expected recoverable amount of the cash-generating unit. The recoverable amount is the higher of value in use and
the fair value less costs to sell. The Company assesses each licence as a separate cash-generating unit. In accordance with the
provisions of IFRS 6 the level identified for the purposes of assessing the Company’s exploration and evaluation assets for
impairment may comprise one or more cash-generating units.
Any impairment arising is recognised in the Income Statement for the year.
Leases
The Company assesses whether a contract is or contains a lease, at inception of the contract.
Leases with an original term not exceeding 12 months and low value leased items continue to be accounted as previously, with
amounts payable being charged to the Income Statement on a straight-line basis over the lease term.
The Company recognises a right-of-use asset and a corresponding lease liability with respect to all other lease arrangements in
which it is the lessee. The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee
uses its incremental borrowing rate.
The lease liability is presented as a separate line in the Balance Sheet.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
• The lease term has changed in which case the lease liability is remeasured by discounting the revised lease payments using
a revised discount rate.
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an
unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a
revised discount rate is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before
the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter of the lease term and useful life of the underlying asset.
The depreciation starts at the commencement date of the lease.
Provisions
Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, for which it is
probable that an outflow of economic resources will result, and that outflow can be reliably measured.
Exploration and evaluation assets
Pre-licence costs associated with exploring or evaluating prospects are written off as incurred to the Income Statement.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
1. Accounting Policies (continued)
All costs associated with exploring and evaluating prospects within licence areas, including the initial acquisition of the licence
are capitalised on a project-by-project basis pending determination of the feasibility of the project. Costs incurred include
appropriate technical and administrative expenses but not general overheads. When a decision is made to proceed to
development, the related expenditures will be transferred to proven projects. Where a licence is relinquished, a project is
abandoned, or is considered to be of no further commercial value to the Company, the related costs are written off.
Upon farming out an exploration licence the Company, as the farmor, designates expenditure previously capitalised in respect
of the licence to the partial interest retained. Cash consideration received for the farm-out is offset against the carrying value by
the farmor, with any excess above the previously capitalised expenditure being accounted as a gain on disposal. Thereafter, the
farmor capitalises its own share of subsequent expenditure and does not recognise the share of expenditure incurred by the
farmee.
The recoverability of exploration and evaluation assets is dependent upon the discovery of economically recoverable reserves,
the ability of the Company to obtain necessary financing to complete the development of reserves and future profitable
production or proceeds from the disposition of recoverable reserves.
Intangible exploration and evaluation assets are not depreciated and are carried forward, subject to the provisions of the
Company’s impairment of exploration and evaluation policy, until the technical feasibility and commercial viability of extracting
hydrocarbons are demonstrable. At such point exploration and evaluation assets are assessed for impairment and any
impairment charge is recognised before reclassification of the assets to a category of property, plant and equipment.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation. Depreciation is provided on a straight-line basis at rates
calculated to write off the cost less the estimated residual value of each asset over its expected useful economic life. The
residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of
the age and in the condition expected at the end of its useful life.
The annual rate of depreciation for each class of depreciable asset is:
Leasehold improvements over lease term
Office lease over lease term
Fixtures & fittings 15%
Computer equipment 25%
The carrying value of property plant and equipment is assessed annually and any impairment is charged to the income
statement.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable result for the year. Taxable profit differs from profit as reported in the Income
Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the reporting date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset
realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
1. Accounting Policies (continued)
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 they relate to income taxes levied by the same taxation authority and the Company intends to settle its
current tax assets and liabilities on a net basis.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks.
Cash equivalents comprise bank deposits held for the purpose of meeting short-term cash commitments that are subject to an
insignificant risk of changes in value and are readily convertible into known amounts of cash, subject to a notice period up to a
maximum of 95 days.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction
price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable).
Financial assets are classified into the following categories:
•
•
•
amortised cost
fair value through profit or loss (FVTPL)
fair value through other comprehensive income (FVOCI).
In the periods presented the Company does not have any financial assets categorised as FVTPL or FVOCI.
The classification is determined by both:
•
•
the entity’s business model for managing the financial asset
the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs,
finance income or other financial items.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions:
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
•
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where
the effect of discounting is immaterial. The Company’s cash and cash equivalents, trade and other receivables fall into this
category of financial instruments.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
1. Accounting Policies (continued)
The Company assesses the expected credit losses on a forward-looking basis, defined as the difference between the
contractual cash flows and the cash flows that are expected to be received, associated with its assets carried at amortised cost.
The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade
receivables only, the simplified approach permitted by IFRS 9 is applied, which requires expected lifetime losses to be
recognised from initial recognition of the receivables. Losses are recognised in the income statement. When a subsequent
event causes the amount of impairment to decrease, the decrease in impairment is reversed through the income statement.
Classification and measurement of financial liabilities
The Company’s financial liabilities include trade and other payables.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method.
All interest-related charges are included within finance costs or finance income.
Jointly Operations
The Company is party to joint oil and gas licences which are unincorporated joint arrangements. There is a contractual
agreement that sets out the terms of the relationship over the relevant activities of the Company and at least one other party.
The Company has a legal degree of control over these joint operating arrangements through Joint Operating Agreements. The
Company classifies its interests in joint arrangements as Joint Operations: where the Company has both the rights to assets and
obligations for the liabilities of the joint arrangement.
The Company accounts for its share of assets, liabilities, income and expenditure of Joint Operations in which it holds an
interest, classified in the appropriate Balance Sheet and Income Statement headings. The Company’s revenue and cost of sales
include revenues and operating costs associated with the Company’s interest.
A list of the Company’s interests in Joint Operations is given in note 16.
Equity
Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a
financial liability. The Company’s ordinary shares are classified as equity instruments.
For the purposes of the capital management disclosures given in note 19, the Company considers its capital to be total equity.
Foreign currencies
The functional currency of the Company is Sterling. Transactions denominated in currencies other than the functional currency
of the Company are recorded at the rate of exchange prevailing at the date of the transaction. Monetary assets and liabilities
are translated into the functional currency at the closing rates of exchange at the reporting date. Exchange differences arising
from the restatement of monetary assets and liabilities at the closing rate of exchange at the reporting date or from the
settlement of monetary transactions at a rate different from that at which the asset or liability was recorded are dealt with
through the Income Statement.
Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future, which by definition will seldom result in actual results
that match the accounting estimate. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.
Judgements
Impairment of exploration and evaluation assets (note 10)
Qualifying exploration and evaluation costs are initially classified and held as intangible assets rather than being expensed. In
recording costs as exploration and evaluation assets, judgement is required as to the extent to which the costs are attributable
to the discovery of specific hydrocarbon resources and include both internal and external costs. Expenditure is capitalised by
reference to appropriate Cash Generating Unit (‘CGU’) and is assessed for impairment with reference to IFRS 6 indicators of
impairment. This assessment involves judgement as to the status of licences and the likelihood of renewal of licences which
expire in the near future including the ability to meet licence obligations, budgets and plans for future exploration activity and
expenditure, the results of exploration activity, and assessments of future recoverable values upon development.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
1. Accounting Policies (continued)
Where impairment indicators are identified, an impairment test is performed which requires judgment regarding factors
such as:
(i) The timing of future development of the asset;
(ii) Funding structures and financing costs of development;
(iii) Commercial development opportunities for extracting value from the asset; and
(iv) Modelling inputs such as the appropriateness of discount rates, reserve and resource estimates, oil and gas pricing
predictions, etc.
The carrying value of exploration and evaluation assets were assessed for indicators of impairment at 31 December 2021. In
forming this assessment, the Company considered external and internal competent person’s reports, the status of the licences,
the extent of ongoing exploration activity and steps to secure farm-in partners and other financing which supported the
carrying value.
No indicators of impairment were identified at 31 December 2021. As detailed in note 10, following the relinquishment of
Licences P2424 and P2384, an write down on relinquished intangible assets of £211,583 and £76,968 respectively being their
carrying value were recognised in 2021.
Estimates
Determination of share-based payment costs (note 21)
The determination of these costs is based on financial models. The inputs to these models are based on the Directors’
judgements and estimates and are not capable of being determined with precision. Estimates were required including the
expected life of the option and volatility. In addition, management were required to assess the extent to which the minimum
share price vesting criteria would be met and the most likely period over which those criteria would be met.
Management concluded that the vesting criteria would be met, and the most likely outcome for the share options issued during
the year was that the share price vesting criteria would be met within three years for 34,000,000 share options issued during
the year (2020: 2,177,420 options in three years, 2,177,420 options in four years and 2,177,418 options in five years) as detailed in
note 21. In reaching this conclusion management considered factors including the historical share price performance, their
assessment of possible developments with respect to licences, in particular Licence P2437 and Licence P2252 following the
farm-outs to Shell and the Capricorn farm-out of Licences P2428, P2567 and P2560/P2561/P2562 .
2. Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources, assessing the performance of the
operating segment and making strategic decision, has been identified as the Board of Directors.
The Board of Directors consider that the Company has only one operating segment at corporate level, therefore no additional
segmental information is presented.
3. Employees
2021 2020
£ £
Wages and salaries 1,102,989 857,816
Short-term non-monetary benefits 20,630 17,944
Redundancy payments - 7,855
Defined contribution pension costs 70,038 75,247
Social security costs 136,069 107,208
Share-based payment expense 160,322 147,734
1,490,048 1,213,804
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
3. Employees (continued)
2021 2020
The average monthly number of employees during the year was as follows:
Directors 4 4
Staff 4 3
8 7
Key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Company.
2021 2020
£ £
Salaries and bonuses 837,224 689,944
Short-term non-monetary benefits 9,832 8,319
Defined contribution pension costs 54,591 51,062
Social security costs 105,421 88,523
Share-based payment expense 149,327 144,751
1,156,395 982,599
Directors’ remuneration is disclosed in the Directors’ Report on page 24, including the remuneration of the highest-paid
director.
Bonuses have been accrued in the current financial year but will be paid post year-end and therefore do not form part of the
current year directors’ remuneration figures reported earlier in this report.
Details regarding share options are set out in note 21 to the financial statements.
4. Finance Income
2021 2020
£ £
Bank interest 2,905 58,951
Other interest - 867
2,905 59,818
5. Finance Costs
2021 2020
£ £
Effective interest expense on lease liabilities (see note 17) 34,592 26,049
6. Loss before Tax
2021 2020
£ £
The loss before tax is stated after charging/(crediting):
Amortisation of intangible assets 5,625 6,712
Write down on relinquished intangible assets (see note 10) 288,551 -
Depreciation – owned assets 34,425 18,531
Depreciation – right of use leased assets (office lease) 80,930 87,498
Gain on farm-out of intangible exploration asset (see note 10) 298,173 -
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
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7. Auditors’ Remuneration
2021 2020
£ £
Fees payable to the Company’s auditors for the audit of the Company’s financial statements 34,000 22,500
Fees payable to the Company’s auditors for non-audit related services 2,000 1,995
Fees payable to the Company’s auditors for other audit-related services 1,500 1,500
8. Income Tax
Analysis of income tax expense
No liability to UK corporation tax arose on ordinary activities for the year.
Factors affecting the income tax expense
The tax assessed for the year is different to the standard rate of corporation tax in the UK as explained below:
2021 2020
£ £
Loss on ordinary activities before taxation (1,935,052) (1,665,575)
Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK
(19%) (2020: 19%) (367,660) (316,459)
Effects of:
Capital allowances in excess of depreciation 5,733 (20,997)
Expenses not deductible for tax purposes 629 219
Adjustment in relation to share based payment 30,461 28,069
Unrelieved losses carried forward 330,837 309,168
Income tax expense - -
A deferred tax asset of £3,017,741 (2020: £2,686,905) in respect of accumulated trading losses of £15,882,852 (2020:
£14,141,605) has not been recognised due to the uncertainty and timing of future profits.
9. Loss per Share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the year.
Due to the losses incurred during the year, a diluted loss per share has not been calculated as this would serve to reduce the
basic loss per share. There were 128,840,450 (2020: 94,840,450) share options outstanding at the end of the year that could
potentially dilute basic earnings per share in the future.
Basic and diluted loss per share
2021 2020
£ £
Loss per share from continuing operations (0.14)p (0.12)p
The loss and weighted average number of ordinary shares used in the calculation of loss per share are as follows:
2021 2020
£ £
Loss used in the calculation of total basic loss per share (1,935,052) (1,665,575)
Number of shares 2021 2020
Number Number
Weighted average number of ordinary shares for the purposes of basic loss per share 1,405,964,855 1,405,964,855
Deltic Energy Plc Annual Report & Accounts 2021
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
10. Intangible Assets
Exploration &
evaluation Software
assets licences Total
£ £ £
Cost
At 1 January 2020 1,115,605 39,257 1,154,862
Additions 309,685 - 309,685
At 31 December 2020 1,425,290 39,257 1,464,547
Additions 1,488,159 - 1,488,159
Farm-out of licence (421,780) - (421,780)
Write down on relinquished assets (288,551) - (288,551)
At 31 December 2021 2,203,118 39,257 2,242,375
Amortisation and impairment
At 1 January 2020 - 26,920 26,920
Charge for year - 6,712 6,712
At 31 December 2020 - 33,632 33,632
Charge for year - 5,625 5,625
At 31 December 2021 - 39,257 39,257
Net Book Value
At 31 December 2021 2,203,118 - 2,203,118
At 31 December 2020 1,425,290 5,625 1,430,915
At 1 January 2020 1,115,605 12,337 1,127,942
The net book value of exploration and evaluation assets at 31 December 2021 and 2020 relates solely to the Company’s North
Sea Licences.
Aggregate cash proceeds arising from the farm-out of five Licences (P2428, P2567, P2560, P2561 and P2562) to Capricorn
during the year amounted to £719,953. An amount of £421,780 was deducted from exploration and evaluation assets, being the
previously capitalised expenditure relating to that licence. The surplus of the proceeds over the carrying value amounted to
£298,173 and was recognised as a gain on disposal of the partial interest and included as other operating income in the Income
Statement for the year.
A charge of £288,551 (2020: nil) is recognised resulting from the write down of relinquished intangible assets following the
decision to relinquish Licences P2384 (Manhattan Prospect) and P2424 (Cortez Prospect).
Additions of £1,488,159 (2020: £309,685) differ to the cash flows in the Statement of Cash Flows owing to an increase in trade
and other payables of £634,415 (2020: £48,987 decrease) relating to intangible assets.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
11. Property, Plant and Equipment
Leasehold Office Fixtures Computer
improvements lease and fittings equipment Total
£ £ £ £ £
Cost
At 1 January 2020
Additions
Disposals
At 31 December 2020
Additions
Disposals
At 31 December 2021
Depreciation
At 1 January 2020
Charge for year
Disposals
At 31 December 2020
Charge for year
Disposals
At 31 December 2021
Net Book Value
At 31 December 2021
At 31 December 2020
At 1 January 2020
-
86,452
-
86,452
1,317
-
87,769
-
7,583
-
7,583
18,344
-
25,927
139,767
404,650
(139,767)
404,650
-
-
404,650
106,222
87,498
(139,767)
53,953
80,930
-
134,883
7,854
42,463
(7,655)
42,662
3,138
-
45,800
6,507
3,226
(6,638)
3,095
6,663
-
9,758
19,226
24,477
(5,783)
37,920
1,440
(4,121)
35,239
6,805
7,722
(4,016)
10,511
9,418
(2,279)
17,650
166,847
558,042
(153,205)
571,684
5,895
(4,121)
573,458
119,534
106,029
(150,421)
75,142
115,355
(2,279)
188,218
61,842
78,869
-
269,767
350,697
33,545
36,042
39,567
1,347
17,589
27,409
12,421
385,240
496,542
47,313
The office lease category reflects a right of use asset relating to the office premises occupied by the Company.
Following the execution of the break clause in the previous registered office, during the prior year, the Company moved to new
smaller office premises, entering into a new lease and relinquishing the previous office lease. As a result of which the fully
depreciated right of use lease asset for the previous office was disposed.
12. Trade and Other Receivables
2021 2020
£ £
Current:
Trade receivables 81,585 3,655
Other receivables 31,848 192
Other tax receivables - 6,438
Prepayments 76,965 43,602
190,398 53,887
Non-current:
Rental deposit 37,422 37,422
Total receivables 227,820 91,309
During the year, no impairments were recognised.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
13. Share Capital
Allotted, issued and fully paid
Year ended December 2021 Number £
At beginning of the year Ordinary shares of 0.5 pence each 1,405,964,855 7,029,824
Issue of shares - -
At end of the year Ordinary shares of 0.5 pence each 1,405,964,855 7,029,824
Year ended December 2020 Number £
At beginning of the year Ordinary shares of 0.5 pence each 1,405,964,855 7,029,824
Issue of shares - -
At end of the year Ordinary shares of 0.5 pence each 1,405,964,855 7,029,824
14. Reserves
Reserves Description and purpose
Share capital Nominal value of shares issued.
Share premium Amount subscribed for share capital in excess of nominal value.
Share-based payment reserve Fair value of share options issued.
Accumulated retained deficit Cumulative net losses recognised in the statement of comprehensive
income.
Details of movements in each reserve are set out in the Statement of Changes in Equity on page 35.
15. Trade and Other Payables
2021 2020
£ £
Current:
Trade payables 254,875 50,197
Social security and other taxes 222,324 30,188
Joint operations payable 256,860 -
Other payables and accruals 197,089 73,051
931,148 153,436
The Directors consider that the carrying amounts of trade and other payables approximate to their fair value.
Joint operations payable represents £256,860 (2020: nil) relating to exploration assets.
16. Joint Operations
The Company has entered into the following unincorporated Joint Operations, which are included within the Company’s
financial statements:
Name of Project Principal Activities Company Interest
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P2252 Pensacola Oil and gas exploration 30%
P2437 Selene Oil and gas exploration 50%
P2428 Cupertino/Richmond/Plymouth Oil and gas exploration 40%
P2567 Cadence Oil and gas exploration 40%
P2435 Blackadder Oil and gas exploration 25%
P2258 Pensacola North Oil and gas exploration 30%
P2560/P2561/P2562 Breagh Area Oil and gas exploration 30%
At the balance sheet date there were no contingent liabilities or contingent assets in respect of any of the Joint Operations
other than those disclosed in these financial statements in notes 15.
At the balance sheet date there were capital commitments of £881,481 (2020: nil) relating to Pensacola drilling long leads.
(2020: nil). These amounts are contained within approved joint venture work programmes for 2022.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
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17. Lease Arrangements
Right of use assets
The Company uses leasing arrangements for its office for which a right of use asset is included in property, plant and
equipment.
When a lease begins, a liability and right of use asset are recognised based on the present value of future lease payments.
The movements in the right of use asset are presented under the office lease category in note 11.
Lease liabilities
2021 2020
£ £
Amounts payable at 1 January 396,453 25,787
Additions - 398,301
Effective interest expense 34,592 26,049
Lease payments (116,815) (53,684)
Amounts payable within one year at 31 December 98,995 92,605
Amounts payable after year at 31 December 215,235 303,848
During the prior year, the Company moved to new office premises, entered into a new lease and relinquished the previous office
lease. As a result of which in the prior year the fully depreciated right of use lease asset for the previous office has been
disposed and a new right of use lease asset recognised.
18. Related Party Disclosures
Parties are considered to be related if one party is under common control or can exercise significant influence over the other
party in making financial and operational decisions. In considering each possible related party relationship, attention is directed
to the substance of the relationship, not merely the legal form.
Key management personnel are considered to be the Directors of the Company and Persons Discharging Managerial
Responsibility. Disclosure regarding remuneration of key management is provided in note 3.
There were no related party transactions for the year. During the prior year, Graham Swindells, the Company’s Chief Executive
Officer, purchased 1,500,000 ordinary shares at an average market price of 0.81 pence. Sarah McLeod, the Company’s Chief
Financial Officer, purchased 579,942 at a market price of 0.86 pence.
19. Financial Instruments
Principal financial instruments
The principal financial instruments used by the Company from which the financial risk arises are as follows:
2021 2020
£ £
Financial assets
Cash and cash equivalents – all amounts held in Sterling:
Cash at bank 10,092,205 11,968,858
10,092,205 11,968,858
Rental deposit 37,422 37,422
Trade receivables 81,585 3,655
Other receivables 31,848 192
10,243,060 12,010,127
Financial liabilities
Trade payables 254,875 50,197
Other payables & accruals 453,949 73,051
Lease liabilities1 314,230 396,453
1,023,054 519,700
1 £98,995 of the lease liability is payable within one year and £215,235 is payable greater than one year.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
19. Financial Instruments (continued)
General objectives and policies
The overall objective of the Board is to set policies that seek to reduce as far as practical without unduly affecting the
Company’s competitiveness and flexibility. Further details regarding these policies are:
Policy on financial risk management
The Company’s principal financial instruments comprise cash and cash equivalents, other receivables, trade and other payables.
The Company’s accounting policies and methods adopted, including the criteria for recognition, the basis on which income and
expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are set out in note 1 –
“Accounting Policies”.
The Company does not use financial instruments for speculative purposes. The carrying value of all financial assets and
liabilities approximates to their fair value.
Derivatives, financial instruments and risk management
The Company does not use derivative instruments or other financial instruments to manage its exposure to fluctuations in
foreign currency exchange rates, interest rates and commodity prices.
Foreign currency risk management
The Company has very limited transactional currency exposures as all projects currently undertaken are based in the UK.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Company. The Company has adopted a policy of only dealing with creditworthy counterparties. The Company’s exposure and
the credit ratings of its counterparties are monitored by the Board of Directors to ensure that the aggregate value of
transactions is spread amongst approved counterparties.
The Company applies IFRS 9 to measure expected credit losses for receivables, these are regularly monitored and assessed.
Receivables are subject to an expected credit loss provision when it is probable that amounts outstanding are not recoverable
as set out in the accounting policy. The impact of expected credit losses was immaterial.
The Company’s principal financial assets are cash and cash equivalents and other receivables. Cash and cash equivalents
include amounts held on deposit with financial institutions, including deposits subject to notice periods of no more than 95
days.
The credit risk on liquid funds held in current accounts available on demand and notice account deposits is limited because the
Company’s counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
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No financial assets have indicators of impairment.
The Company’s maximum exposure to credit risk is limited to the carrying amount of financial assets recorded in the financial
statements.
Borrowings and interest rate risk
The Company currently has no borrowings.
The Company’s principal financial assets are cash and cash equivalents and other receivables. Cash equivalents include
amounts held on deposit with financial institutions. The effect of variable interest rates is not significant.
Liquidity risk
During the year ended 31 December 2021, the Company was financed by cash raised through equity funding in the 2019. Funds
raised surplus to immediate requirements are held as short-term cash deposits in Sterling.
The maturities of the cash deposits are selected to maximise the investment return whilst ensuring that funds will be available
as required to maintain the Company’s operations.
In managing liquidity risk, the main objective of the Company is to ensure that it has the ability to pay all of its liabilities as they
fall due. The Company monitors its levels of working capital to ensure that it can meet its liabilities as they fall due.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
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19. Financial Instruments (continued)
The table below shows the undiscounted cash flows on the Company’s financial liabilities as at 31 December 2021 and
31 December 2020 on the basis of their earliest possible contractual maturity.
Within 2 Within 2 – 6 Within 6 – 12 Within 1 – 2 Within 2 – 5
Total months months months years years
£ £ £ £ £ £
At 31 December 2021
Trade payables 254,875 254,875 - - - -
Other payables & accruals 453,949 - 453,949 - - -
Lease liabilities 354,740 - 64,250 60,490 96,537 133,463
1,063,564 254,875 518,199 60,490 96,537 133,463
At 31 December 2020
Trade payables 50,197 50,197 - - - -
Other payables & accruals 73,051 36,629 36,422 - - -
Lease liabilities 481,937 8,946 57,761 60,490 124,740 230,000
605,185 95,772 94,183 60,490 124,740 230,000
20. Capital Management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern,
to provide returns for shareholders and to maintain an optimal capital structure to manage the cost of capital effectively. The
Company defines capital as being share capital plus reserves. The Board of Directors monitor the level of capital as compared
to the Company’s commitments and, where necessary, adjusts the level of capital as is determined to be necessary by issuing
new shares.
The Company was financed by equity in the year ended 31 December 2021 following equity fundraising completed in 2019.
Based on the cash and cash equivalents balance at year end and the Company’s commitments, the Company has adequate
financial resources to cover its budgeted exploration and development programme and meet its other operational obligations
as they fall due within the going concern period.
The Company is subject to an externally imposed capital requirement of maintaining a minimum of £50,000 authorised share
capital, which it has met in both reporting periods presented.
21. Share-Based Payments
The Company share options are equity-share-based payments as defined in IFRS 2. This standard requires that a recognised
valuation methodology be employed to determine the fair value of share options granted. The total share-based payment
charge for the year has been derived through applying the Black Scholes model.
Share options
The Company’s Share Option Plan pursuant to which options over ordinary Shares may be granted to Directors and employees
of the Company, commenced on 4 May 2012. On 31 July 2014, an Enterprise Management Incentives Plan (EMI Plan) was
adopted and options held by employees under the Share Option Plan became governed by the EMI Plan at that date.
Any employed Director or employee of the Company is eligible to receive grants under the EMI Plan. Non-executive Directors
are not eligible to receive grants. Options are non-transferable except in the case of an option holder’s death, in which case the
outstanding options may be exercised by the personal representatives of the option holder.
The maximum number of ordinary Shares in respect of which options can be granted under the EMI Plan is 20 per cent. of the
Company’s issued ordinary share capital, including all awards made over the 10 years preceding the date of the grant. This limit
also includes any rights granted under any other employee share incentive arrangements operated by the Company but
excludes rights that: (i) have lapsed, been forfeited or released; (ii) will be met by the transfer of shares already in issue; or
(iii) are granted to replace an award over shares in a Company acquired by the Company.
The Board of Directors has absolute discretion to grant options, subject to any time vesting or performance conditions that it
outlines. The grant of options will be evidenced by an option agreement.
34,000,000 options were granted during the year to 31 December 2021 under the scheme (2020: 6,532,258) and no options
expired (2020: nil).
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
21. Share-Based Payments (continued)
No share options were exercised during the current or prior year.
The Company recognised a total share-based payment expense of £160,322 for the year ended 31 December 2021 (2020:
£147,734) in respect of share options.
The inputs to the Black-Scholes model for options issued in the current and prior year were as follows:
22 September
Black Scholes Model 2021
Share Price 2.05p
Exercise price 2.05p
Expected Volatility 71.77%
Risk Free Rate of Interest 0.4331%
Expected Dividend Yield 0.00%
Expected Life 6.5 years
Number of options issued 34,000,000
15 June 15 June 15 June
Black Scholes Model 2020 2020 2020
Share Price 0.675p 0.675p 0.675p
Exercise price 1.55p 1.55p 1.55p
Expected Volatility 62.22% 62.22% 62.22%
Risk Free Rate of Interest (0.0095)% (0.0095)% (0.0095)%
Expected Dividend Yield 0.00% 0.00% 0.00%
Expected Life 6.5 years 7.0 years 7.5 years
Number of options issued 2,177,420 2,177,420 2,177,418
Under the terms of the options granted during the year, 11,333,333 options (2020: 2,177,420 options) will vest following the
share price reaching 2.56p (2020: 2.06p) for 30 consecutive days at any time prior to expiry of the options, 10 years from the
grant date, but no earlier than three years after the grant date.
A further 11,333,333 options (2020: 2,177,420 options) will vest following the share price reaching 3.07p (2020: 2.57p) for 30
consecutive days at any time prior to expiry of the options, 10 years from the grant date, but no earlier than three years after
the grant date.
The remaining 11,333,333 options (2020: 2,177,418 options) will vest following the share price reaching 3.58p (2020: 3.10p) for 30
consecutive days at any time prior to expiry of the options, 10 years from the grant date, but no earlier than three years after
the grant date.
The fair value includes the effect of this vesting condition. Management determined that the above options would be most
likely to vest at the earliest possible dates, being three years, four years and five years from grant date as detailed above. The
fair value of the options is therefore being amortised over those time periods.
Expected volatility was determined based on the historic volatility of the Company.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2021
for the year ended 31 December 2021
21. Share-Based Payments (continued)
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are as
follows:
Number of WAEP
Year ended December 2021 options P
Outstanding at the beginning of the year 94,840,450 2.19
Issued 34,000,000 2.05
Outstanding at the end of the year 128,840,450 2.16
Number exercisable at 31 December 2021 22,941,942 2.54
Number of WAEP
Year ended December 2020 options P
Outstanding at the beginning of the year 88,308,192 2.24
Issued 6,532,258 1.55
Outstanding at the end of the year 94,840,450 2.19
Number exercisable at 31 December 2020 22,908,192 2.54
The weighted average remaining contractual life of options outstanding as at 31 December 2021 was 7 years (2020: 7.1 years).
The range of exercise prices relating to options outstanding at 31 December 2021 was 1.33p to 8.0p (2020: 1.33p to 8.00p).
22. Subsequent Events
There were no significant events subsequent to 31 December 2021 to report.
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Contents
Company Information
Strategic Report
1 Chairman’s Statement
2 Chief Executive’s Statement
5 Operational Review
12 Environment Social and Governance
14 Financial Review
15 Business Risks
16 Section 172 Statement
17 Investing Policy
Corporate Governance
18 Introduction
18 Corporate Governance Statement
21 Audit Committee Report
22 Remuneration Committee Report
23 Board of Directors and Senior Management
24 Report of the Directors
26 Statement of Directors’ Responsibilities
27 Independent Auditor’s Report
Financial Statements
33 Income Statement
33 Statement of Comprehensive Income
34 Balance Sheet
35 Statement of Changes in Equity
36 Statement of Cash Flows
37 Notes to the Financial Statements
Directors
M S Lappin (Chairman)
G C Swindells (Chief Executive Officer)
A J Nunn (Chief Operating Officer)
P N Cowley (Non-Executive)
P W Nicol (Non-Executive)
Joint Secretary
S M McLeod
Gravitas Company Secretarial Services Limited
Registered Office
1st Floor
150 Waterloo Road
London
SE1 8SB
Registered Number
07958581 (England and Wales)
Nominated Adviser & Joint Corporate Broker
Allenby Capital Limited
5 St Helen's Place
London
EC3A 6AB
Joint Corporate Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Solicitors
K&L Gates LLP
One New Change
London
EC4M 9AF
Financial Public Relations
Vigo Consulting
Sackville House
40 Piccadilly
London
W1J OHR
Registrar
Share Registrars Limited
3 The Millennium Centre
Crosby Way
Farnham
Surrey
GU9 7XX
Perivan 262577
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Deltic Energy Plc
1st Floor
150 Waterloo Road
London
SE1 8SB
United Kingdom
+44 (0)20 7887 2630
www.delticenergy.com
Deltic Energy Plc
Annual Report & Accounts 2021