Echo Global Logistics, Inc. Annual Report 2016

Plain-text annual report

Registered Oﬃce Echo Energy plc Tower Bridge House, St Katharine's Way, London, E1W 1DD, United Kingdom Commercial Oﬃce Central Point, 45 Beech Street, London. EC2Y 8AD, UK Telephone: +44 (0) 20 70 70 0447 www.echoenergyplc.com | Email: info@echoenergyplc.com Annual report 2016 !!!" Contents Company information Chairman's statement Strategic report Directors' report Independent auditor's report Consolidated statement of comprehensive income Consolidated statement of ﬁnancial position Company statement of ﬁnancial position Statement of changes in equity Consolidated statement of cash ﬂows Company statement of cash ﬂows Notes to the ﬁnancial statements 2 3 4 5 10 12 13 14 15 16 17 18 Company information Board of directors J Parsons (Non-executive chairman) W Coleman ( Chief executive oﬃcer) S Whyte ( Non-executive director) M Fumagalli (Non-executive director) Company secretary A M Bateman Tower Bridge House St. Katharine’s Way London E1W 1DD Registered number 05483127 (England and Wales) Auditor Crowe Clark Whitehill LLP St. Bride’s House 10 Salisbury Square London EC4Y 8EH Solicitors Riverbank House 2 Swan Lane London EC4R 3TT Nominated adviser ZAI corporate Finance Limited New Liverpool House, 4th Floor 15 - 17 Eldon Street London EC2M 7LD Broker Brandon Hill Capital Limited 1 Tudor Street London EC4Y 0AH Registrars Share Registrars Limited The Courtyard 17 West Street Farnham Surrey GU9 7DR Financial PR Vigo Communications 180 Piccadilly St James' London W1J 9HF Website www.echoenergyplc.com 2 The Company is now positioned for its bold and adventur- ous growth strategy, with approximately GBP 26M cash and further access to capital if required. The Echo Energy journey is underway... James Parsons Non-executive chairman Chairman's statement Introduction Echo Energy is a plc is a London listed Latin American focused mid-cap gas company in the making. The company is pursuing a high-value, piped, onshore gas strategy across South and Central America, commencing with a Multi Tcf potential exploration portfolio. Select corporate transactions in the region are also under evaluation. On 6 March 2017, after the ﬁnancial year end, the company announced a carefully orchestrated relaunch which saw the re-shaping of the Board, the introduction of a cornerstone investor in the form of Greenberry plc, an associate of Continental Investment Partners, an open oﬀer as well as the renaming of the company. These elements combined to fully rebrand the company and set a platform for a new and exciting journey. The open oﬀer was a vital component to that relaunch providing private investors in Echo an opportunity to access this high growth vehicle, led and backed by an experienced and successful team, on the same terms as our cornerstone investor. The fair treatment of private investors is central to the philosophy of Echo and will remain so going forward. On 18 April 2017, the company announced its decision to pursue its LATAM regional exploration strategy focused on multi Tcf, low cost, onshore gas piped to high value, growing markets. This strategy was based on a combination of elements, which included the recently increasing growth across the region, the increasing shortage of gas in the major markets of Brazil and Argentina and a historic period of regional underinvestment in the sector. In combination, we believe these provide a compelling investment proposition for investors at this speciﬁc point in the cycle. Consequently, we have planned to rapidly acquire a series of assets across the region, including potential asset acquisitions in Bolivia, Colombia, Argentina and Brazil, leveraging existing pipeline infrastructure and processing capability which enables new discoveries to be brought to market quickly. In addition, we intend to selectively bring in pre-identiﬁed strategic partners to the business to fund and technically de-risk such assets. 3 Strategic report Review of Developments and Future Prospects In March 2017, the group rebranded and relaunched its equity proposition with a new cornerstone investor, board of directors and gas strategy hinged on high quality, multi Tcf potential, acreage. Consequently, the group does not see signiﬁcant value in its Italian and Egyptian assets and has already therefore begun preparations to exit those positions, subject to any necessary shareholder approvals. The Tunisian asset remains under strategic review. The loss after taxation for the year to 31 December 2016 was £7,254,184 (31 December 2015: £1,909,067). No dividends were paid during the year and none are proposed. The Chairman’s Statement on page 3 sets out a review of the company’s business and future prospects and that is not duplicated here. Key performance indicators The directors consider that the Group’s near-term key objectives include the ﬁrst tranche of strategic acquisitions in LATAM and exiting its Egyptian and Italian positions. Principal Risks and Uncertainties To support the new strategy the group has completed a number of institutional funding rounds and one open oﬀer with each equity fundraise being placed without a discount to market. This funding will be used to acquire and drill new assets and fund the administrative costs of the group. This poses a risk in terms of capital being available to fund the long-term debt. If the position in Egypt is not exited, the disputes with North Petroleum, the operator of East Ghazalat, will require resolution and the timing remains uncertain. If resolution is not possible the group may have to resort to legal or arbitration proceedings to protect its investment in the licence and to avoid the need for impairment. The lower oil price environment and country security risk concerns in Tunisia pose a risk to our ability to secure a farm-in partner for Ksar Hadada to allow the work programme to go ahead. In Italy there is uncertainty as to the ﬁnal outcome of the litigation in relation to Rivara given the complexity of local, regional and national governmental structures and processes. However, the group is committed to exiting this asset. Financial Risk Management The group’s operations expose it to ﬁnancial risks including credit risk, commodity pricing risk, liquidity risk and market risks. The group has signiﬁcant debt. Considerable rigour is applied to the management of costs within the group. 1. Liquidity risk Liquidity is the risk that the group will not be able to meet its ﬁnancial obligations as they fall due. In common with many other groups of similar scale in the Oil and Gas business, the group’s continued future operations depend on the ability to raise suﬃcient working capital through the issue of equity 4 share capital or to ﬁnd suitable partners to farm-in to the group’s portfolio. The directors are conﬁdent that the group is adequately funded and further funding will be forthcom- ing, should it be needed. This will allow the continued ﬁnancing of operations. 2. Market risks Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will aﬀect the group’s position. The objective of market risk management is to manage and control market risk exposures within acceptable parameters. 3. Pricing and risks Through its production interests there is now direct price risk to the business from energy price ﬂuctuations, in particular the price of oil. and natural gas. In addition, the economic viability of investment opportunities being reviewed by management will be inﬂuenced by commodity price movements and forecasts. The directors also acknowledge that the impact of oil price changes on the fortunes of other companies in the sector will inﬂuence the wider investment environment and the ability of the group to raise capital in the future. 4. Interest Rate Cash ﬂow risk The group has interest bearing liabilities in the form of debt which carries a ﬁxed annual coupon. Interest bearing assets are only cash balances that earn interest at a ﬂoating rate. 5. Foreign exchange risk Historically, the group has operated across multiple currencies, principally British pounds, Euro, US Dollars and Egyptian pounds. As activities in Italy, Egypt and Ksar Hadada are scaled back and exited foreign currency exposure in those regions will diminish. Conversely, as activities in LATAM increase, the US dollar and other relevant local currencies exposures will assume greater importance as revenues and anticipated work programme expenditure will be incurred and will be expected to be denominated in non-British pound currencies such that managing dollar and other currency exposures will so become more important. The impact of inﬂation on local currencies will also need to be considered in managing the company's exposures. 6. Credit risk Credit risk is the risk of ﬁnancial loss to the group if a customer or counter-party to a ﬁnancial instrument fails to meet its contractual obligations. The group will be reliant on partners in the licences and joint ventures to be able to fund their share of costs and work programme obligations and in particular to meet their share of costs borne or paid by the group on their behalf. By order of the Board on 01 June 2017 Greg Coleman Chief executive oﬃcer The directors’ report The directors submit their report and accounts for the ﬁnancial year ended 31 December 2016. The comparative period is the year ended 31 December 2015. Principal activities Echo Energy plc is the holding company for a group of companies engaged in the exploration, appraisal and development of oil and natural gas producing assets. The company’s recently relaunched strategy stated its principal long-term focus to be the development of a portfolio of assets in the Central and Southern American geographies. Results and dividends Turnover for the year was £nil (2015: £nil), and the loss before tax was £7,254,184 (2015: £1,909,067). The directors have not declared any dividend in respect of the year ended 31 December 2016 (2015: £nil). Directors The directors who served during the year were as follows: G Nash, resigned 14 March 2017 W Coleman O Franks, resigned 6 March 2017 M Miller, resigned 19 October 2016 Following the company’s relaunch in March 2017, the directors appointed were as follows: J Parsons, appointed 9 March 2017 S Whyte, appointed 9 March 2017 M Fumagalli, appointed 28 March 2017 The Articles of Association of the company state that at each Annual General Meeting one-third of the directors who are subject to retirement by rotation or, if their number is not three nor a multiple of three, the number nearest to but not exceeding one-third, shall retire from oﬃce. Directors’ insurance The company has taken out an insurance policy to indemni- fy the directors and oﬃcers of the company against liability when acting for the company. Directors’ responsiblities Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial year that give a true and fair view of the state of aﬀairs of the company and the group and of the proﬁt or loss for that period. In doing so the directors are required to: • select suitable accounting policies and apply them consistently; • make judgments and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the ﬁnancial statements; and • prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the company and group will continue in business. The directors are responsible for maintaining proper accounting records that disclose with reasonable accuracy at any time the ﬁnancial position of the company and the group and to 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 the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are further responsible for ensuring that the Strategic Report and the Report of the Directors and other information included in the Annual Report and Financial Statements is prepared in accordance with applicable law in the United Kingdom. The maintenance and integrity of the Echo Energy plc web site is the responsibility of the directors; the work carried out by the auditors does not involve the consideration of these matters and, accordingly, the auditors accept no responsi- bility for any changes that may have occurred in the accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other information included in annual reports may diﬀer from legislation in other jurisdictions. Auditors Each person who is a director at the date of approval of this annual report conﬁrms that: • so far as the director is aware, there is no relevant audit information of which the company’s auditor is unaware; and • the director has taken all steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the auditor is aware of that information. 5 The directors’ report This information is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. A resolution to reappoint the auditors, Crowe Clark Whitehill LLP will be proposed at the Annual General Meeting. Directors' interests in shares Ordinary shares of 0.01 p each Percentage of issued 1 January 2016 31 December 2016 22 May 2017 share capital on 22 May 2017 G Nash Note 1 W Coleman Note 2 O Franks M Miller J Parsons S Whyte M Fumagalli 27,872,447 27,872,447 27,872,447 4,546,077 2,333,333 4,546,077 4,546,077 66,333,333 66,333,333 - - - - - - - - - - - - Note 1 : 12,504,073 shares held by G Nash, 14,898,024 shares held by Grayson Nash LLC, a company controlled by G Nash and 470,350 shares held indirectly by A Nash, wife of G Nash. Note 2 : 4,212,744 shares held by W Coleman and 333,333 shares held by TD Direct Investing Nominees (Europe) Limited as a nominee company for the beneﬁt of W Coleman. 0.45% 0.07% 1.08% 0.00% 0.00% 0.00% 0.00% Directors’ interests in warrants over ordinary shares (pre-consolidation) Warrant at 1.50 p each Warrant at 1.00 p each Warrant at 0.065 p each 1 January 2016 31 December 2016 22 May 2017 1 January 2016 31 December 2016 22 May 2017 1 January 2016 31 December 2016 22 May 2017 G Nash Note 1, 2, 3 ,4 4,656,288 4,656,288 4,656,288 W Coleman Note 2, 3 856,372 856,372 856,372 O Franks Note 2, 3 1,000,000 1,000,000 1,000,000 M Miller J Parsons S Whyte M Fumagalli Note 5 - - - - - - - - - - - - - - - - - - - - 5,166,667 5,166,667 2,500,000 2,500,000 - - - - - - - - - - - - - - - - - - 75,000,000 - - - - - - - - - - - - Note 1 : 5,166,667 warrants at 1.00p held by G Nash and 4,656,288 warrants at 1.50p held by Grayson Nash LLC, a company controlled by G Nash Note 2 : Warrants issued at 1.50p are exercisable immediately and expire on 28 May 2017. Note 3 : Warrants issued at 1.00p are exercisable immediately and expire on 18 November 2017. Note 4 : Warrants issued at 0.065p vest after 3 years and expire after 5 years. Note 5: M Fumagalli holds no direct interest in the shareholding of the Company, but is a Founding Partner of, and a 25% shareholder in Continental Investment Partners (an aﬃliate of Greenberry plc, the Company's new cornerstone investor, which is beneﬁcially entitled to warrants at 0.065 p each) 6 Directors’ remuneration An analysis of directors’ remuneration is given in Note 4 to the ﬁnancial statements. The company established a share option scheme on 25 November 2005 to reward and incentivise the executive management team for delivering share price growth. The share option scheme is administered by the Remuneration Committee. On 10 October 2014, options were awarded to members of the new management team. In recognition that the management team have agreed to receive salaries signiﬁcantly below market rates for individuals of their experience, these options are not subject to any share-performance related criteria but are conditional upon continuity of service criteria. The exercise price for these options has been set to match the subscription price for the Placing and Open Oﬀer completed in June 2014. No additional options were issued to any of the Directors during their ﬁnancial year to 31 December 2016. The ten year window to issue options under this scheme expired during this ﬁnancial year and the directors are in the process of designing a new option incentivisation scheme. Directors’ share options Name of Director Start of year Granted in the year Exercised/ lapsed in the year Market price at date of exercise End of year Exercise price Earliest date for exercise Latest date for exercise W Coleman - discretionary Tranche 3 200,000 - W Coleman - discretionary Tranche 4 Note 1 2,628,583 - O Franks - discretionary Tranche 4 Note 1 525,717 - - - - - - - 200,000 1p 04/03/2013 03/03/2023 2,628,583 3p 10/10/2015 10/10/2024 525,717 3p 10/10/2015 10/10/2024 Note 1 : These options were granted on 10 October 2014 and vest in three equal tranches on 10 October 2015, 2016 and 2017 so long as the option holder remains a director or employee of the company. No options were granted or exercised during 2016. In addition to the above, as part of the Board re-structuring, J Parsons and W Coleman each have been awarded options over 600 million new ordinary shares exercisable at 0.065 pence per share. The options vest after 3 years and expire after 5 years. In addition, such options can only be exercised if the closing mid-market price of an ordinary share on the day prior to exercise exceeds 0.12 pence per ordinary share. S Whyte and, M Fumagalli, have been granted 100 million options each on identical terms. All of these option awards are on a pre-consolidation basis. 7 The directors’ report Corporate governance The company is subject to the continuing requirements of the AIM Rules and is committed to adhering to the corpo- rate governance standards appropriate for a company of this size and nature. The company is not required to comply with the UK Corporate Governance Code published in April 2016 by the Financial Reporting Council (“the Code”) nor issue a statement of compliance with it. The directors support high standards of corporate governance and are committed to managing the company in an honest and ethical manner. Where practical and appropriate for a company of this size and nature, the company endeavours to take account of the Code and the recommendations on corporate governance of the Quoted Companies Alliance. The Board seeks to ensure that the company is managed in an eﬃcient, eﬀective and entrepreneurial manner for the beneﬁt of all shareholders over the longer term. Board of directors The board of directors comprised a Non-executive chairman, a Chief executive oﬃcer and one Executive director and one Non-executive director during the year. M Miller resigned 19 October 2016. Subsequent to the year end, G Nash, O Franks resigned and J Parsons, S Whyte and M Fumagalli were appointed to the board of directors. The directors are of the opinion that the board comprises a suitable balance and that the structure of the Board ensures that no one individual dominates the decision-making process. The directors have signiﬁcant and relevant resource exploration and production experience together with ﬁnance and corporate development skills. The board meets regularly throughout the year and met 14 times during the year to 31 December 2016. The board is responsi- ble for formulating, reviewing and approving the company’s strategy, ﬁnancial activities and operating performance. Day-to-day management is devolved to the executive directors who are charged with consulting the board on all signiﬁcant ﬁnancial and operational matters. Consequently, decisions are made promptly and following consultation among the directors concerned where necessary and appropriate. All necessary information is supplied to the directors on a timely basis to enable them to discharge their duties eﬀectively, and all directors have access to indepen- dent professional advice, at the company’s expense, as and when required. The participation of both private and institutional investors at the Annual General Meeting is welcomed by the board. Internal controls The directors acknowledge their responsibility for the company’s and the group’s systems of internal control, which are designed to safeguard the assets of the group and ensure the reliability of ﬁnancial information for both internal use and external publication. Overall control is ensured by a regular detailed reporting system covering both technical progress of a project and the state of the group’s ﬁnancial aﬀairs. The board has put in place proce- dures for identifying, evaluating and managing any signiﬁ- cant risks that face the group. Any system of internal control can provide only reasonable, and not absolute, assurance that material ﬁnancial irregulari- ties will be detected or that the risk of failure to achieve business objectives is eliminated. The directors, having reviewed the eﬀectiveness of the system of internal ﬁnancial, operational and compliance controls and risk management, consider that the system of internal control operated eﬀectively throughout the ﬁnancial year and up to the date the ﬁnancial statements were signed. Committees Each of the following committees has its own terms of reference. Audit Committee The Audit Committee comprises M Fumagalli and S Whyte, each Non-executive directors. The terms of reference of the Audit Committee indicate at least two regular meetings per year and its formal meeting to review the 2016 audit took place on 25 May 2017. All directors received a copy of the audit ﬁndings report prior to the meeting and had an opportunity to comment. The meeting was attended by the auditor. The VP of ﬁnance and a representative of the external auditor are normally invited to attend meetings. Other directors or staﬀ may be invited to attend, as considered beneﬁcial by the committee. The Audit Committee’s primary responsibilities are to review the eﬀectiveness of the company’s systems of internal control, to review with the external auditor the nature and scope of their audit and the results of the audit, and to evaluate and select an external auditor. Remuneration Committee The Remuneration Committee met once during the year. Its members are J Parsons (chairman), M Fumagalli and S Whyte. The company’s policy is to remunerate senior executives fairly in such a manner as to facilitate the recruitment, retention and motivation of staﬀ. The Remuner- ation Committee agrees with the board a framework for the remuneration of the Chairman, the Executive directors and the Senior management of the company. The principal objective of the committee is to ensure that members of the executive management of the company are provided incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the company. Non-executive fees are considered and agreed by the board as a whole. 8 Subsequent events Annual General Meeting Events which have occurred since 31 December 2016 are included in Note 29 to the attached ﬁnancial statements. The eleventh Annual General Meeting of the company is to be held at 252 High Holborn, London, WC1V 7EN, United Kingdom at 11:00am on Tuesday 27 June 2017. Signed by order of the directors on 01 June 2017 Greg Coleman Chief executive oﬃcer Going concern The ﬁnancial information for the year to 31 December 2016 has been prepared assuming the group will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. The assessment has been made based on the group's anticipated activities which have been included in the ﬁnancial forecast for the years 2017 and 2018. We also carefully manage operating and administrative costs. Since the year end the company has been relaunched, rebranded and been recapitalised through the issue of new ordinary shares and through securing of long-term debt. Despite the turnaround in the company’s funding position, the directors remain acutely cost conscious and value focused. Following the relaunch in March 2017, a strategic review of the existing assets was undertaken. Speciﬁcally, and as a result of the company stated agreement to avoid conﬂict of interest between Sound Energy plc and its oﬃcers which includes Echo exiting its Italian business, the directors have decided to terminate and exit all activities in Italy. Further- more, the directors are currently exploring opportunities to divest of its interest in Egypt. The interests in Tunisia continue to be the subject of strategic review. Based on the above, the directors have formed a judgment that the going concern basis should be adopted in preparing the ﬁnancial statements. Should the group be unable to continue trading, adjust- ments would have to be made to reduce the value of the assets to their recoverable amounts, to provide for further liabilities which might arise and to classify ﬁxed assets as current. Information set out in the Strategic Report The Directors have chosen to set out the following informa- tion in the Strategic Report which would otherwise be required to be contained in the Directors Report: • review of developments and future prospects; and • principal risks and uncertainties. 9 Independent auditor's report Basis for qualiﬁed opinion on ﬁnancial statements The scope of our work was limited as a result of the following matter. As disclosed in Note 17 a dispute has arisen in relation to the operation of the joint venture arrangements relating to the group’s 25 per cent. working interest in the East Ghazalat production licence, held through Independent Resources (Egypt) Limited, in which the group holds a 50 per cent interest (the ‘Joint Venture’). During the reporting period the Joint Venture was served with notice of default in relation to cash calls raised by North Petroleum International S.A. (“North Petroleum”) the operator of East Ghazalat. The Joint Venture has rebutted the claims from North Petroleum but the breakdown in relations has meant that operator North Petroleum has continued to refuse to furnish ﬁnancial information to allow a proper determination of licence costs and an audit of licence revenues to be completed. As a consequence of the lack of access to primary accounting records we have been unable to obtain suﬃcient appropriate audit evidence in relation to the group and company ﬁnancial statements concerning: • the carrying value of £Nil of the group’s investments in equity-accounted joint ventures as at 31 December 2016; • the carrying value of £85,565 of the company’s invest- ments in equity accounted joint ventures as at 31 December 2016; and • the group’s share of any proﬁt or loss attributable to the group’s underlying interests in the East Ghazalat licence for the period from 1 July 2015 to 31 December 2016. Independent Auditor’s Report to the Members of Echo Energy (formerly Independent Resources Plc) We have audited the ﬁnancial statements of Echo Energy (formerly Independent Resources plc) for the year ended 31 December 2016 which comprise the Consolidated and Company Statements of Financial Position, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Cash Flow Statements, the Consolidated and Company Statements of Changes in Equity and the related notes. The ﬁnancial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company ﬁnancial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor 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. Our responsibility is to audit and express an opinion on the ﬁnancial statements in accordance with applicable law and Interna- tional Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the ﬁnancial statements A description of the scope of an audit of ﬁnancial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. 10 Independent auditor's report • we have not received all the information and explanations we require for our audit. Stephen Bullock Senior statutory auditor For and on behalf of Crowe Clark Whitehill LLP Statutory Auditor London 01 June 2017 Qualiﬁed opinion on ﬁnancial state- ments In our opinion except for the eﬀects of the matter described in the Basis for Qualiﬁed Opinion paragraph • the ﬁnancial statements give a true and fair view of the state of the group’s and of the parent company's aﬀairs as at 31 December 2016 and of the group’s loss for the year then ended; • the group ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and • the parent company ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the ﬁnancial statements have been prepared in accor- dance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion based on the work undertaken in the course of our audit: • the information given in the Strategic Report and the Directors' Report for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements; and • the Directors’ Report and Strategic report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In light of the knowledge and understanding of the compa- ny and its environment obtained in the course of the audit, we have not identiﬁed material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company ﬁnancial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors' remuneration speciﬁed by law are not made; or 11 Consolidated statement of comprehensive income Continuing operations Revenues Cost of sales Gross proﬁt Administrative expenses Other operating income Operating loss Financial income Financial expense Share of post-tax losses of equity account joint ventures Loss before tax Taxation Loss from continuing operations Loss after taxation for the year from discontinued operations Loss for the year Other comprehensive income: Other comprehensive income to be reclassiﬁed to proﬁt or loss in subsequent periods ( net of tax) Exchange diﬀerence on translating foreign operations Notes Year to 31 December 2016 Year to 31 December 2015 2 3 6 7 17 9 8 £ - - - £ - - - (7,091,475) - (1,652,631) - (7,091,475) (1,652,631) 144 (21,133) (137,906) 351 (3,533) (156,985) (7,250,370) (1,812,798) - (7,250,370) (3,814) (7,254,184) - (1,812,798) (96,269) (1,909,067) - 807,370 - (296,126) Total comprehensive loss for the year (6,446,814) (2,205,193) Loss attributable to: Owners of the parent Total comprehensive loss attributable to: Owner of the parent Loss per share (pence) 10 Basic Dilluted Loss per share ( pence) for continuing operations Basic Diluted (7,254,184) (1,909,067) (6,446,814) (2,205,193) (18.6) (18.6) (18.6) (18.6) (26.7) (26.7) (25.4) (25.4) The notes on pages 18 to 41 form an integral part of these ﬁnancial statements. 12 Consolidated statement of ﬁnancial position Notes 31 December 2016 31 December 2015 Non-current assets Property, plant and equipment Goodwill Other intangible assets Investments in equity-accounted joint ventures Current assets Other receivables Cash and cash equivalents Assets held for distribution Current liabilities Trade and other payables Liabilities directly associated with the assets held for distribution Net current assets Net assets Equity attributable to equity holders of the parent Share capital Share premium Deferred shares Shares to be issued Warrant reserve Share option reserve Foreign currency translation reserve Retained earnings 12 14 15 17 18 19 8 21 8 22 23 £ 3,647 - 432,486 - 436,133 £ 11,127 - 5,387,018 137,906 5,536,051 303,011 184,849 487,860 18,892 506,752 (428,547) (802) (429,349) 488,877 101,300 590,177 43,179 633,356 (1,164,063) (20,968) (1,185,031) 77,403 513,536 2,430,612 17,621,763 - 277,468 714,977 85,515 471,680 (21,088,479) (551,675) 4,984,376 2,159,247 16,628,623 - - 302,453 71,718 (335,690) (13,841,975) Total equity 513,536 4,984,376 These ﬁnancial statements were authorised for issue and approved by the board of directors on 01 June 2017 ........................... ............................................. J Parsons ............................................. W G Coleman Company registration number 05483127 The notes on pages 18 to 41 form an integral part of these ﬁnancial statements. 13 Company statement of ﬁnancial position Non-current assets Property, plant and equipment Interest in subsidiary undertakings Investments in equity-accounted joint ventures Amounts receivable from group undertakings Current assets Other receivables Cash and cash equivalents Current liabilities Trade and other payables Net current assets Net assets Equity attributable to equity holders of the parent Share capital Share premium Deferred shares Shares to be issued Warrant reserve Share option reserve Retained earnings Notes 31 December 2016 31 December 2015 13 16 17 18 18 19 21 22 23 235,217 181,424 416,641 (411,350) (411,350) £ 3,647 3 85,565 1,073,235 1,162,450 5,291 1,167,741 2,430,612 17,621,763 - 277,468 714,977 85,515 (19,962,594) 388,794 94,210 483,004 (1,084,119) (1,084,119) £ 11,119 595,080 294,891 3,378,956 4,280,046 (601,115) 3,678,931 2,159,247 16,628,623 - - 302,453 71,718 (15,483,110) Equity shareholders’ funds 1,167,741 3,678,931 These ﬁnancial statements were authorised for issue and approved by the board of directors on 01 June 2017 ........................... The Company has not presented its own proﬁt and loss account. Its loss for the year was £4,487,164 (2015: £1,938,281) ............................................. J Parsons ............................................. W G Coleman Company registration number 05483127 The notes on pages 18 to 41 form an integral part of these ﬁnancial statements. 14 Statement of changes in equity Retained earnings Share capital Share premium Shares to be issued Warrant reserve Share option reserve Consolidated 1 January 2015 Loss for the year Exchange diﬀerence £ (11,932,908) (1,909,067) - Total comprehensive loss for the year (1,909,067) - - - - - - £ 1,051,434 £ 16,302,050 £ - £ - £ 25,776 302,453 71,718 (335,690) 4,984,376 Foreign currency translation reserve £ (39,564) Total Equity £ 5,406,788 - (1,909,067) (296,126) (296,126) (296,126) (2,205,193) - - - - - 1,513,147 302,453 (78,761) - 45,942 (335,690) 4,984,376 - (7,254,184) 807,370 807,370 807,370 (6,446,814) - - - - - 471,680 1,151,394 412,524 (9,889) - 421,945 513,536 - - - - - - - - - - - - - - - - 3,834,431 (1,938,281) 1,513,147 302,453 (78,761) - 45,942 3,678,931 3,678,931 (4,487,164) 1,151,394 412,524 (9,889) - 421,945 1,167,741 - - - - - - - - - - - - - - - - - - - - - 302,453 - - - 302,453 - - - - - - - 45,942 71,718 - - - - 412,524 - - - - - - 302,453 - - - 302,453 - - - - - - (7,680) 21,477 85,515 25,776 - - - - - 45,942 71,718 302,453 71,718 - - 412,524 - - - 714,977 - - - - (7,680) 21,477 85,515 - - - - - 1,107,813 405,334 - - - - - (78,761) - - (13,841,975) 2,159,247 16,628,623 (13,841,975) 2,159,247 16,628,623 (7,254,184) - - - - - - - - - - 7,680 264,065 887,329 - - - - (9,889) - - 7,300 115,700 277,468 (21,088,479) 2,430,612 17,621,763 277,468 714,977 (13,544,829) 1,051,434 16,302,050 (1,938,281) - - - - - - - 1,107,813 405,334 - - - - - (78,761) - - (15,483,110) 2,159,247 16,628,623 (15,483,110) 2,159,247 16,628,623 (4,487,164) - - - - - 7,680 264,065 887,329 - - - - (9,889) - - - - - - - - - - - - - - - - 7,300 115,700 (19,962,594) 2,430,612 17,621,763 277,468 277,468 New shares issued New share warrants issued Share issue costs Share options lapsed Share-based payments 31 December 2015 1 January 2016 Loss for the year Exchange diﬀerences New shares issued New share warrants issued Share issue costs Share options lapsed Share-based payments 31 December 2016 Company 1 January 2015 Loss for the year New shares issued New share warrants issued Share issue costs Share options lapsed Share-based payments 31 December 2015 1 January 2016 Loss for the year New shares issued New share warrants issued Share issue costs Share options lapsed Share-based payments 31 December 2016 Total comprehensive loss for the year (7,254,184) Share premium reserve represents the amounts subscribed for share capital in excess of the nominal value of the shares issued, net of cost of issue. Deferred shares are a separate class of share capital. Shares to be issued represents the fair value of shares to be issued upon the satisfaction of certain criteria in respect of services received. Warrant reserve represents the cumulative fair value of share warrants granted. Share options reserve represents the cumulative fair value of share options granted. Foreign currency translation reserve represents gains and losses arising on the retranslation of net assets of overseas operations. Retained earnings represents the cumulative net gains and losses recognised in the consolidated income statemen The notes on pages 18 to 41 form an integral part of these ﬁnancial statements. 15 Consolidated statement of cash ﬂows Cash ﬂows from operating activities Loss from continuing operations Loss from discontinued operations Adjustments for: Depreciation of property, plant and equipment Loss on disposal of property, plant and equipment Impairment of intangible assets and goodwill Share of post-tax loss of equity accounted joint ventures Placing costs expensed Share-based payments Warrants issued Financial income Financial expense (Increase)/decrease in other receivables Decrease in net amounts held for disposal Increase in trade and other payables Cash used in operations Income taxes received Net cash used in operating activities Cash ﬂows from investing activities Interest received Interest paid Equity-accounted join venture Purchase of intangible assets Purchases of property, plant and equipment Net cash used in investing activities Cash ﬂows from ﬁnancing activities Issue of share capital Share issue costs Net cash from ﬁnancing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January 2016 Cash and cash equivalents at 31 December 2016 Year to 31 December 2016 Year to 31 December 2015 £ (7,250,370) (3,814) (7,254,184) 5,441 2,437 5,756,250 137,906 - 421,945 412,524 (144) 21,133 (496,692) 312,074 4,121 (731,190) (911,687) - (911,687) 144 (21,133) - - (396) (21,385) 1,026,510 (9,889) 1,016,621 83,549 101,300 184,849 £ (1,812,798) (96,269) (1,909,067) 5,372 - - 156,985 69,244 45,942 302,453 (351) 3,533 (1,325,889) (289,826) (254,517) 555,053 (1,315,179) - (1,315,179) 351 (3,533) (294,891) (73,013) (3,486) (374,572) 1,513,147 (148,005) 1,365,142 (324,609) 425,909 101,300 The notes on pages 18 to 41 form an integral part of these ﬁnancial statements. 16 Company statement of cash ﬂows Cash ﬂows from operating activities Loss before taxation Adjustments for: Provision against amounts owing by subsidiary undertakings Impairment of carrying value of investment in subsidiary undertakings Impairment of investment in joint venture Depreciation of property, plant and equipment Loss on disposal of property, plant and equipment Placing costs expensed Share-based payments Warrants issued Financial income Financial costs expense (Increase)/decrease in other receivables Increase in trade and other payables Cash used in operations Income taxes received Net cash used in operating activities Cash ﬂows from investing activities Interest received Interest paid Acquisition of equity accounted joint venture Purchases of property, plant and equipment Decrease/(increase) in amounts owing by subsidiary undertakings Net cash (used in)/from investing activities Cash ﬂows from ﬁnancing activities Issue of share capital Share issue costs Net cash from ﬁnancing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January 2016 Cash and cash equivalents at 31 December 2016 Year to 31 December 2016 Year to 31 December 2015 £ (4,487,164) 2,797,766 595,077 (209,326) 5,431 2,437 - 421,945 412,524 (57,331) 23,739 (494,902) 278,461 (672,769) (889,210) - (889,210) 57,331 (23,739) 418,652 (396) (492,045) (40,197) 1,026,510 (9,889) 1,016,621 87,214 94,210 181,424 £ (1,938,281) 39,486 321,292 - 5,335 - 69,244 45,942 302,453 (92,800) 5,142 (1,242,187) (292,042) 540,091 (994,138) - (994,138) 92,800 (5,142) (294,891) (3,486) (353,648) (564,367) 1,513,147 (148,005) 1,365,142 (193,363) 287,573 94,210 The notes on pages 18 to 41 form an integral part of these ﬁnancial statements. 17 Notes to the ﬁnancial statements 1. Accounting policies General information These ﬁnancial statements are for Echo Energy plc (“the company”) and subsidiary undertakings. The company is registered, and domiciled, in England and Wales and incorporated under the Companies Act 2006. The nature of the company’s operations and its principal activities are set out in the directors’ report on page 8. The company's functional currency is the Euro, and presenta- tional currency is Great British Pounds Sterling. The principal accounting policies are summarised below: (a) Basis of preparation The ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. These ﬁnancial statements are for the year 1 January 2016 to 31 December 2016. The comparatives shown are for the year 1 January 2015 to 31 December 2015. New standards and interpretations not applied At the date of authorisation of these ﬁnancial statements, a number of Standards and Interpretations were in issue but not yet eﬀective. The directors do not anticipate that the adoption of these standards and interpretations, or any of the amend- ments made to existing standards as a result of the annual improvements cycle, will have a material eﬀect on the ﬁnancial statements in the year of initial application. (b) Basis of consolidation The group ﬁnancial statements consolidate the ﬁnancial statements of the company and its subsidiaries under the acquisition method. The ﬁnancial statements of subsidiaries are included in the consolidated ﬁnancial statements from the date that control commences until the date control ceases. Control is achieved where the company has the power to govern the ﬁnancial and operating policies of an investee entity so as to obtain beneﬁts from its activities. Acquisitions are accounted for under the acquisition method. (c) Going concern The ﬁnancial information has been prepared assuming the group will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continu- ing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. The assessment has been made based on the group’s anticipated activities which have been included in the ﬁnancial forecast for the years 2017-2018. To support the new LATAM strategy the group has, since the reporting date, completed a number of institutional funding rounds and one open oﬀer with each equity fundraise being placed at nil discount to market. This funding will be used to acquire new assets and fund the administrative costs of the group. Details of the funding arrangements are set out in note 29. The directors continue to explore all forms of potential fundraising at both a corporate and asset level. In relation to Ksar Hadada, management’s intention remains to secure a farm-in or investment partner to cover programme costs. Based on the above, the directors have formed a judgment that the going concern basis should be adopted in prepar- ing the ﬁnancial statements. Should the group be unable to continue trading, adjust- ments would have to be made to reduce the value of the assets to their recoverable amounts, to provide for further liabilities which might arise and to classify ﬁxed assets as current. (d) Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the group’s interest in the fair value of the identiﬁable assets and liabilities of its subsidiar- ies and jointly controlled entities at the dates of acquisition. The cost of acquisition will include any contingent liabilities in relation to the purchase cost. Any such contingent liability will have been measured at fair value. Goodwill is recognised as an asset and reviewed for impairment at least annually. (e) Property, plant and equipment Property, plant and equipment is stated at cost, or deemed cost less accumulated depreciation, and any recognised impairment loss. Land is stated at cost and is not depreciat- ed. Depreciation is charged so as to write oﬀ the cost or valuation of assets less any residual value over their estimated useful lives, using the straight line method, on the following bases: Fixtures & ﬁttings Motor vehicles 12% to 33.3% straight line 25% straight line (f) Other intangible assets - exploration licence costs Exploration and evaluation expenditure comprises costs which are directly attributable to researching and analysing exploration data. It also includes the costs incurred in acquiring mineral rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects. When it has been established that a mineral deposit has development potential, all costs (direct and applicable overhead) incurred in connection with the exploration and development of the mineral deposits are capitalised until either production commences or the project is not considered economically viable. In the event of production commencing, the capitalised costs are amortised, through administrative expenses, over the expected life of the mineral reserves on a unit of production basis. Other pre-trading expenses are written oﬀ as incurred. Where a project is abandoned or is considered to be of no further interest, the related costs are written oﬀ. 18 Notes to the ﬁnancial statements 1. Accounting policies (g) Impairment of tangible and intangible assets exclud- ing goodwill At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suﬀered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects the current market assessments of the time value of money and the risks speciﬁc to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in proﬁt or loss, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in proﬁt or loss, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (h) Taxation Current taxation Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted, or substantively enacted, by the balance sheet date. Deferred taxation Deferred tax is provided in full using the balance sheet liability method for all taxable temporary timing diﬀerences arising between the tax bases of assets and liabilities and their carrying values for ﬁnancial reporting purposes. Deferred tax is measured using currently enacted or substantively enacted tax rates. Deferred tax assets are recognised to the extent the temporary diﬀerence will reverse in the foreseeable future and it is probable that future taxable proﬁt will be available against which the asset can be utilised. Deferred tax is recognised for all deductible temporary diﬀerences arising from investments in subsidiaries, branches and associates, and interests in joint ventures, to the extent it is probable that the temporary diﬀerence will reverse. (i) Conversion of foreign currency In consolidating subsidiary undertakings foreign currency transactions are translated at the average exchange rates over the year. Liabilities are translated at the rates prevailing at the balance sheet date. Assets are translated at the rates ruling at the balance sheet date. The group has signiﬁcant transactions and balances denominated in euros. The year end exchange rate to sterling was 1.168 (2015: 1.359) and the average exchange rate during the year was 1.225 (2015: 1.381). In the company ﬁnancial statements the income and expenses of foreign operations are translated at the exchange rates ruling at the dates of the transactions. Exchange diﬀerences arising on translation are recognised directly in equity until the disposal of the investments in the foreign operation. The assets and liabilities of foreign operations, both monetary and non-monetary, are translat- ed at exchange rates ruling at the balance sheet date. The reporting currency of the company and group is sterling. (j) Share-based payments The fair value of equity instruments granted to employees, or warrants issued to shareholders, is charged to the income statement, with a corresponding increase in equity. The fair value of share options is measured at grant date, using the binomial option pricing model or Black-Scholes pricing model where considered more appropriate, and spread over the period during which the employee becomes uncondi- tionally entitled to the award. The charge is adjusted to reﬂect the number of shares or options that vest, except where forfeiture is due to market-based criteria. (k) Financial instruments Financial assets and ﬁnancial liabilities are recognised on the group’s balance sheet when the group becomes a party to the contractual provisions of the instrument. Trade and other receivables Trade and other receivables are initially measured at fair value and are subsequently reassessed at the end of each accounting period. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insigniﬁcant risk of changes in value. Financial liabilities and equity Financial liabilities and equity instruments issued by the group are classiﬁed according to the substance of the contractual 19 Notes to the ﬁnancial statements 1. Accounting policies arrangements entered into and the deﬁnitions of a ﬁnancial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The accounting policies adopted for speciﬁc ﬁnancial liabilities and equity instruments are set out below. Trade payables Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the eﬀective interest rate method. Equity instruments Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Shares issued are held at their fair value. (l) Accounting estimates and judgements The preparation of ﬁnancial statements in conforming with adopted IFRSs requires management to make judgments, estimates and assumptions that aﬀect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experi- ence and other factors considered reasonable at the time, but actual results may diﬀer from those estimates. Revisions to these estimates are made in the period in which they are recognised. Going concern The ﬁnancial information has been prepared assuming that the group will continue as a going concern. Based on the success of the recent funding the directors have formed their opinion on the group continuing as a going concern for the foreseeable future, in particular for the twelve months from the date of approval of the ﬁnancial statements. For further details see note 1(c). (m) Use of estimates The assumptions concerning the future, and other key sources of estimation at the balance sheet date, that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year are discussed below. Impairment of intangibles and goodwill Determining whether the group's projects remain technically feasible, the necessary approvals from regulators will be obtained, that they will be commercially viable and that the group will be able to obtain the necessary ﬁnance to complete them. The Group holds a 100% interest in Rivara Gas Storage srl. Intangible assets include an amount of £5,756,000 with respect to project expenditure. The regional council, Regione Emilia Romagna, where the project is located is currently denying authorisation for project development. However authorisation has been granted by the national government. As a result Rivara Gas Storage srl has appealed against this decision to the Emilia Romagna Bologna Administrative Court. Whilst the Group has obtained third party legal opinions regarding the appeal and believe that they would be successful in their appeal it has been decided, for strategic reasons, to close its Italian operations and therefore this asset has been impaired in full during the year. Investment in East Ghazalat If the position in Egypt is not exited, the disputes with North Petroleum, the operator of East Ghazalat, will require resolution and the timing remains uncertain. If resolution is not possible the group may have to resort to legal or arbitration proceedings to protect its investment in the licence and to avoid the need for impairment. Further information risks pertaining to the group’s interest in East Ghazalat is set out in the Chairman’s Statement. As set out in note 17 the group’s investment in East Ghazalat does not reﬂect its share of proﬁts or losses attributable to the joint venture and the investment is reﬂected in the statement of ﬁnancial position at estimated recoverable amount. (n) Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the eﬀect of the time value of money is material, provisions are discount- ed using a current pre-tax rate that reﬂects, where appropriate, the risks speciﬁc to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a ﬁnance expense. (o) Commitments and contingencies Commitments and contingent liabilities are disclosed in the ﬁnancial statements. They are disclosed unless the possibility of an outﬂow of resources embodying economic beneﬁts is remote. A contingent asset is not recognised in the ﬁnancial statements but disclosed when an inﬂow of economic beneﬁts is probable. (p) Events after the balance sheet date Post period-end events that provide additional information about a company’s position at the balance sheet date and are adjusting events are reﬂected in the ﬁnancial tatements. Post period-end events that are not adjusting events are disclosed in the notes when material. (q) Joint arrangements The group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the group and at least one other party. Joint control is assessed under the same principals as control over subsidiaries. The group classiﬁes its interests in joint arrangements as either: Joint ventures: where the group has rights to only the net assets of the joint arrangement Joint operations: where the group has both the rights to assets and obligations for the liabilities of the joint arrange ment. In assessing the classiﬁcation of interests in joint arrange- ments, the group considers: The structure of the joint arrangement The legal form of joint arrangements structured through a separate vehicle The contractual terms of the joint arrangement agreement Any other facts and circumstances (including any other contractual arrangements). The group accounts for its interests in joint ventures using the equity method. Joint ventures are initially recognised in the consolidated statement of ﬁnancial position at cost. 20 Notes to the ﬁnancial statements 1. Accounting policies c. Ksar Hadada Subsequently associates are accounted for using the equity method, where the group's share of post acquisition proﬁts and losses and other comprehensive income is recognised in the consolidated statement of proﬁt and loss and other comprehensive income (except for losses in excess of the group's investment in the associate unless there is an obligation to make good those losses). 2. Business segments The group has adopted IFRS 8 Operating segments. Per IFRS 8, operating segments are based on internal reports about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance. The group's reportable operating segments are as follows: The previously reported segment of Ribolla Basin CBM assets has been classiﬁed as a discontinued operation and has been excluded from the analysis below. The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on assessing progress made on projects and the management of resources used. Segment assets and liabilities are presented inclusive of inter-segment balances. The group did not generate any revenue during the year to 31 December 2016 nor in the year to 31 December 2015. Information regarding each of the operations of each reportable segment within continuing operations is included in the following table. a. Parent company b. Rivara Year to 31 December 2016 Interest revenue Interest expense Depreciation Impairment of intangible assests Income tax Loss before tax Assets Liabilities Year to 31 December 2015 Interest revenue Interest expense Depreciation Impairment of intangible assets Income tax Loss before tax Assets Liabilities Parent Company £ 57,331 (23,739) 5,431 - - Rivara Ksar Hadada Consolidation Total £ 1 (54,582) 10 5,756,250 - £ - - - - - £ (57,188) 57,188 - - - £ 144 (21,133) 5,441 5,756,250 - (4,487,164) (5,820,694) (34,752) 3,092,240 (7,250,370) 1,579,091 (411,350) 1,596,601 433,226 (2,684,925) (3,193,325) (1,079,688) 4,255,816 923,993 (428,547) 92,800 (5,142) 5,335 - - 7,107 (59,780) 37 - - - - - - - (99,556) 61,389 - - - 351 (3,533) 5,372 - - (1,938,281) (96,672) (95,412) 317,567 (1,812,798) 4,763,050 (1,084,119) 6,352,843 442,739 (5,432,404) 6,126,228 (2,717,707) (1,054,449) 3,692,212 (1,164,063) Consolidation adjustments in respect of the loss before tax includes the loss of £137,906 (2015: £156,985) in relation to equity accounted joint ventures. Consolidation adjustments in respect of assets includes the loss of £294,891 (2015: £156,985) in relation to equity accounted joint ventures. 21 Notes to the ﬁnancial statements 2. Business segments The geographical split of non-current assets arises as follows: 31 December 2016 Intangible assets Goodwill Property, plant and equipment 31 December 2015 Intangible assets Goodwill Property, plant and equipment 3. Expenses and auditor's remuneration The operating loss is stated after charging the following amounts: Depreciation of property, plant and equipment - owned Loss on disposal of property, plant and equipment Fees payable to the company's auditor for the audit of the company's annual accounts Non-associated auditors' remuneration of subsidiaries - audit of subsidiaries Rent of land and buildings Share-based payments Net foreign exchange losses 4. Aggregated directors' remuneration The total amounts for directors' remuneration were as follows: Total emoluments paid Share-based payments - equity settled Total United Kingdom Overseas Total £ £ £ - - 3,647 - - 11,119 432,486 432,486 - - - 3,647 5,387,018 5,387,018 - 8 - 11,127 Year to 31 December 2016 £ 5,441 Year to 31 December 2015 £ 5,372 2,437 20,000 3,000 119,932 421,945 869 - 24,000 16,471 112,431 45,942 710 Year to 31 December 2016 £ - Year to 31 December 2015 £ 313,588 303,156 303,156 45,942 359,530 Total emoluments paid to directors as stated above includes payments made to third parties in respect of services provided of £Nil (2015: £132,721). Directors' emoluments Short-term employee beneﬁts £ Share-based payments £ Post- employment beneﬁts £ - - - - - 30,000 - 14,583 120,000 28,468 193,051 15,000 202,193 70,963 15,000 303,156 - 4,886 - 24,433 - 29,319 - - - - - - - - - - - Total £ 15,000 202,193 70,963 15,000 303,156 30,000 4,886 14,583 144,433 28,468 222,370 Directors' remuneration for the year was: Year to 31 December 2016 G G Nash O P T Franks W G Coleman M L B Miller Aggregate emoluments Year to 31 December 2015 G G Nash O P T Franks A R H Thomas W G Coleman M L B Miller Aggregate emoluments 22 Notes to the ﬁnancial statements 4. Aggregated directors' remuneration The directors' remuneration detailed above include amounts paid in respect of the highest paid director: Emoluments and payments made to third parties in respect of services provided by director Year to 31 December 2016 £ Year to 31 December 2015 £ - 120,000 The group reimburses the directors for expenses incurred by them or their service companies in the performance of their duties for the group. Brian Hepp and Feilim McCole, whilst not directors of the company under the Companies Act 2006, were part of the management team and were considered to be key management personnel. Details of the commercial arrangements between them and the company are detailed in note 26. Pension arrangements The company has made no contributions in respect of pension provisions to the directors in either ﬁnancial year. Consultancy agreements The following consultancy agreements have been entered into: Individual providing service O P T Franks Parties to consultancy agreement Echo Energy plc and O P T Franks - ongoing from 1 May 2013 at £10,000 per month. 5. Staﬀ costs and numbers The average number of persons employed by the group during the year including executive directors is analysed below: Administration Group employment costs - all employees including executive directors Wages and salaries Social security costs Share-based payments - equity settled Payments made to third parties in respect of services provided by directors 6. Financial income Interest receivable 7. Financial expense Interest payable Year to 31 December 2016 Year to 31 December 2015 4 7 Year to 31 December 2016 £ 219,393 Year to 31 December 2015 £ 394,932 8,013 309,284 536,690 - 536,690 59,984 45,942 500,858 120,537 621,395 Year to 31 December 2016 £ 144 Year to 31 December 2015 £ 351 144 351 Year to 31 December 2016 £ 21,133 Year to 31 December 2015 £ 3,533 21,133 3,533 23 Notes to the ﬁnancial statements 8. Discontinued operations The group was unable to ﬁnd an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni, in Italy, therefore, these opportunities will no longer be pursued. As a result the directors decided, prior to 31 December 2014, to signiﬁcantly reduce its activities in Italy and to discontinue the activities within Independent Energy Solutions srl which dealt solely with these opportunities. With Independent Energy Solutions srl classiﬁed as discontinued operations, the Ribolla Basin CBM assets segment is no longer presented in the segment note. The results of Independent Energy Solutions srl, incorporating consolidation adjustments, are presented below: Revenue Administrative expenses Operating loss before impairment Impairment of the historic cost and carrying value of intangible assets Impairment of goodwill arising on acquisition of Independent Energy solutions srl - consolidation adjustment Operating loss after impairment Financial income Financial expense Loss on ordinary activities before taxation Taxation Loss for the year from discontinued operations Year to 31 December 2016 £ - (3,814) (3,814) - - (3,814) - - (3,814) - (3,814) Year to 31 December 2015 £ - (96,272) (96,272) - - (96,272) 3 - (96,269) - (96,269) The major classes of assets and liabilities of Independent Energy Solutions srl classiﬁed as held for distribution to equity holders of the parent as at 31 December 2016 are as follows: Assets Intangible assets - fully impaired Property, plant and equipment Other receivables Cash and cash equivalents Assets held for distribution Liabilities Trade and other payables Liabilities directly associated with the assets held for distribution Net assets directly associated with disposal group The net cash ﬂows incurred by independent Energy Solutions srl are as follows: Operating Investing Financing 31 December 2016 £ - 31 December 2015 £ - - 18,883 9 18,892 (802) (802) 18,090 Year to 31 December 2016 £ (8,063) - - - 35,107 8,072 43,179 (20,968) (20,968) 22,211 Year to 31 December 2015 £ (53,092) 3 - Net cash (outﬂow) inﬂow (8,063) (53,089) 24 Notes to the ﬁnancial statements 8. Discontinued operations Loss per share (pence) Liabilities directly associated with the assets held for distribution Liabilities directly associated with the assets held for distribution Year to 31 December 2016 (0.0) (0.0) Year to 31 December 2015 (1.3) (1.3) Immediately before the classiﬁcation of Independent Energy Solutions srl as discontinued operations, the recoverable amount was estimated for certain items of property, plant and equipment and no impairment was identiﬁed. No adjustment has been made to reduce the carrying amount of the assets in the disposal group to their fair value less costs to distribute. Immediately before the classiﬁcation of Independent Energy Solutions srl as discontinued operations, the recoverable amount was estimated for the company's intangible assets and these were impaired in full. 9. Taxation Tax on proﬁt on ordinary activities Taxation charged based on proﬁts for the period UK corporation tax based on the results for the period Total tax expense in income statement Reconciliation of the tax expense Year to 31 December 2016 £ - - Year to 31 December 2015 £ - - The tax assessed for the year is diﬀerent from the standard rate of corporation tax in the UK of 20% (2015: 20.25%). The diﬀerences are explained below: Loss on ordinary activities before taxation Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 20% (2015: 20.25%) Eﬀects of: Expenses disallowed for tax purposes Deferred tax not provided - tax losses carried forward Total current tax Year to 31 December 2016 £ (7,250,370) Year to 31 December 2015 £ (1,812,798) (1,450,074) (367,092) 1,281,268 168,806 - 29,283 337,809 - The group has tax losses available to be carried forward in certain subsidiaries and the parent. With anticipated substantial lead times for the group's projects, and the possibility that these may therefore expire before their use, it is not considered appropriate to anticipate an asset value for them. No amounts have been recognised within tax on the results of the equity accounted joint ventures. 25 Notes to the ﬁnancial statements 10. Loss per share The calculation of basic and diluted loss per share at 31 December 2016 was based on the loss attributable to ordinary shareholders of £7,254,184. The weighted average number of ordinary shares outstanding during the year ending 31 December 2016 and the eﬀect of the potentially dilutive ordinary shares to be issued are shown below. Net loss for the year Basic weighted average ordinary shares in issue during the year Diluted weighted average ordinary shares in issue during the year Loss per share ( pence) Basic Diluted Year to 31 December 2016 £ (7,254,184) 38,962,494 38,962,494 Year to 31 December 2015 £ (1,909,067) 7,149,778 7,149,778 (18.6) (18.6) (26.7) (26.7) The company has consolidated all of the existing ordinary shares as at close of business on 22 May 2017 into ordinary shares of 0.25 pence on the basis of one consolidated share for every 25 existing ordinary shares. As this consolidation happened after the year end date but before the approval of the ﬁnancial statements the weighted average number of ordinary shares shown above has been adjusted for both years to reﬂect this change and the prior year loss per share ﬁgure has been re-stated. In accordance with IAS 33 and as the average share price in the year is lower than the exercise price, the share options do not have a dilutive impact on earnings per share for the year ending 31 December 2016. Deferred shares have been excluded from the calculation of loss per share due to their nature. Please see note 22 for details of their rights. 11. Loss of the parent company A loss of £4,487,164 in 2016 (2015: £1,938,281) has been dealt with in the ﬁnancial statements of the parent company. The parent company is not required to produce its own proﬁt and loss account (or IFRS equivalent) because of the exemption provision in Section 408 of the Companies Act 2006. 26 Notes to the ﬁnancial statements 12. Property, plant and equipment (group) 31 December 2016 Cost 1 January 2016 Exchange diﬀerences Additions Disposals 31 December 2016 Depreciation 1 January 2016 Exchange diﬀerences Charge for the year Disposals 31 December 2016 Carrying amount 31 December 2016 31 December 2015 31 December 2015 Cost 1 January 2015 Exchange diﬀerences Additions 31 December 2015 Depreciation 1 January 2015 Exchange diﬀerences Charge for the year 31 December 2015 Carrying Amount 31 December 2015 31 December 2014 Fixtures & Fittings £ 57,710 1,075 396 (27,416) 31,765 46,583 1,073 5,441 (24,979) 28,118 3,647 11,127 54,610 (386) 3,486 57,710 41,594 (383) 5,372 46,583 11,127 13,016 27 Notes to the ﬁnancial statements 13. Property, plant and equipment (parent company) 31 December 2016 Fixtures & Fittings £ 51,112 396 (27,416) 24,092 39,993 5,431 (24,979) 20,445 3,647 11,119 47,626 3,486 51,112 34,658 5,335 39,993 11,119 12,968 Cost 1 January 2016 Additions Disposals 31 December 2016 Depreciation 1 January 2016 Charge for the year Disposals 31 December 2016 Carrying amount 31 December 2016 31 December 2015 31 December 2015 Cost 1 January 2015 Additions 31 December 2015 Depreciation 1 January 2015 Charge for the year 31 December 2015 Carrying Amount 31 December 2015 31 December 2014 28 Notes to the ﬁnancial statements 14. Goodwill ( group) 31 December 2016 Cost 1 January 2016 and 31 December 2016 Impairment 1 January 2016 Impairment charge for the year 31 December 2016 Carrying amount 31 December 2016 31 December 2015 31 December 2015 Cost 1 January 2015 and 31 December 2015 Impairment 1 January 2015 Impairment charge for the year 31 Decmber 2015 Carrying Amount 31 December 2015 31 December 2014 Goodwil £ 450,766 450,766 - 450,766 - - 450,766 450,766 - 450,766 - - The goodwill arises as a result of the acquisition of Independent Energy Solutions srl which contains the Ribolla project. The group was unable to ﬁnd an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni, in Italy, therefore, these opportunities will no longer be pursued. As a result the directors have decided that the carrying value of the goodwill is not recoverable and have fully provided against this. 29 Notes to the ﬁnancial statements 15. Other intangible assets (group) Development and exploration 31 December 2016 Cost 1 January 2016 Exchange diﬀerences Disposals 31 December 2016 Impairment 1 January 2016 Exchange diﬀerences Impairment charge for the year 31 December 2016 Carrying amount 31 December 2016 31 December 2015 31 December 2015 Cost 1 January 2015 Exchange diﬀerences Additions 31 December 2015 Impairment 1 January 2015 Exchange diﬀerences Imapirmnet charge for the period 31 December 2015 Carrying Amount 31 December 2015 31 December 2014 Rivara gas storage facility Ribolla Basin CBM assets £ £ Ksar Hadada exploration acerage £ Total £ 4,950,206 3,870,839 1,517,641 10,338,686 806,044 630,291 - - - (4,326) 1,436,335 (4,326) 5,756,250 4,501,130 1,513,315 11,770,695 - - 5,756,250 5,756,250 - 4,950,206 3,870,839 630,291 - 1,080,829 - - 4,951,668 630,291 5,756,250 4.501,130 1,080,829 11,338,209 - - 432,486 436,812 432,486 5,387,018 5,239,353 (289,147) - 4,096,939 (226,100) - 1,444,628 10,780,920 - 73,013 (515,247) 73,013 4,950,206 3,870,839 1,517,641 10,338,686 - - - - 4,096,939 (226,100) - 1,080,829 - - 5,177,768 (226,100) - 3,870,839 1,080,829 4,951,668 4,950,206 5,239,353 - - 436,812 363,799 5,387,018 5,603,152 The primary intangible assets are all internally generated. For the purpose of impairment testing of intangible assets, recoverable amounts have been determined based upon the value in use of the group’s three projects. Rivara gas storage facility The Group holds a 100% interest in Rivara Gas Storage srl. Intangible assets include an amount of £5,756,000 with respect to project expenditure. The regional council, Regione Emilia Romagna, where the project is located is currently denying authorisa- tion for project development. However authorisation has been granted by the national government. As a result Rivara Gas Storage srl has appealed against this decision to the Emilia Romagna Bologna Administrative Court. Whilst the Group has obtained third party legal opinions regarding the appeal and believe that they would be successful in their appeal it has been decided, for strategic reasons, to close its Italian operations and therefore this asset has been impaired in full during the year. 30 Notes to the ﬁnancial statements 16. Shares in subsidiary undertakings Cost 1 January 2016 Additions in year 31 December 2016 Impairment 1 January 2016 Impairment 31 December 2016 Carrying amount 31 December 2016 31 December 2015 Year to 31 December 2016 £ 4,834,095 - 4,834,095 4,239,015 595,077 4,834,092 3 595,080 The group has decided, for strategic reasons, to close its Italian operations and therefore has impaired in full its investments in its Italian subsidiaries. Details of the subsidiaries, all of which have a 31 December year end, are as follows: Subsidiary Class of share % owned Country of registration Nature of business Independent Energy Solutions srl Ordinary 100 % Italy Independent Gas Management srl Ordinary 100 % Italy Independent Resources (Ksar Hadada) Limited Ordinary 100 % England & Wales Rivara Gas Storage srl (see below) Ordinary 100 % Italy Appraisal of coal bed methane opportunities Management of appriasal of underground gas storage Appraisal of oil and gas exploration permit Appraisal of underground gas storage facilities Independent Resources (Sahara) Limited Independent Resources (Tunisia) Limited Ordinary Ordinary 100 % 100 % England & Wales England & Wales Dormant Dormant The registered oﬃce of Independent Resources (Ksar Hadada) Limited is Tower Bridge House, St Katharines Way, London, E1W 1DD. The registered oﬃce of Independent Resources (Sahara) Limited and Independent Resources (Tunisia) Limited is Sixty Six North Quay, Great Yarmouth, Norfolk, United Kingdom, NR30 1HE The registered oﬃce of Independent Energy Solutions srl, Independent Gas Management srl and Rivara Gas Storage srl is Via Delle Terme Deciane, 10, 00153 Roma, Italy The group's interest in Rivara Gas Storage srl is entirely held through the shareholding of Independent Gas Management srl. 31 Notes to the ﬁnancial statements 17. Investments in equity-accounted joint ventures Cost 1 January 2016 Additions in year 31 December 2016 Impairment 1 January 2016 Impairment recognised in parent company 31 December 2016 Share of post-tax losses of equity accounted joint ventures 1 January 2016 Share of post-tax losses of equity accounted joint ventures for the year 31 December 2016 Carrying amount - Group 31 December 2016 31 December 2015 Carrying amount - Company 31 December 2016 31 December 2015 Year to 31 December 2016 £ 294,891 - 294,891 - 209,326 209,326 156,985 137,906 294,891 - 137,906 85,565 294,891 The group has a 50 per cent interest in Independent Resources (Egypt) Limited, a company incorporated in England & Wales, whose purpose is to invest in the oil and gas exploration and production activities in the Arab Republic of Egypt. The other shareholder in Independent Resources (Egypt) Limited (the “Joint Venture”) is Nostra Terra Oil and Gas Company plc (“Nostra Terra”), a UK resident company whose shares are traded on the AIM market of the London Stock Exchange. In October 2015 the Joint Venture acquired a 50 per cent working interest in the East Ghazalat production licence located in the Western Desert, Egypt from TransGlobe Energy Corporation through the acquisition of the entire share capital of Trans Globe (GOS) Inc. a wholly-owned subsidiary of TransGlobe Energy Corporation (“TransGlobe). In December 2015, the name of the acquired company was changed to Sahara Resources (GOS) Inc. The total consideration for the transaction was $3.5 million of which $2.5 million had been deferred as a vendor loan repayable by the Joint Venture on 30 September 2017. The loan note accrued interest at 10 per cent annum on the principle sum, payable semi-annually. NostraTerra and Independent Resources plc are joint and severally liable for the repayment of the loan note. The ﬁnal loan note principal and semi-annual interest payable to Trans Globe have been settled during the year. As a non-mon- etary long-term asset, the consideration for acquiring the share capital of Trans Globe GOS Inc. has been recorded at the prevailing exchange rate at the time of completion of the acquisition but has not been retranslated at the prevailing year-end exchange rate. 32 Notes to the ﬁnancial statements 17. Investments in equity-accounted joint ventures In January 2016 the Joint Venture was served with notice of default in relation to cash calls raised by North Petroleum Interna- tional S.A. (“North Petroleum”) the operator of East Ghazalat. The Joint Venture has rebutted the claims from North Petroleum but the current breakdown in relations has meant that operator North Petroleum has been unwilling to furnish ﬁnancial information to allow a proper determination of licence costs and an audit of licence revenues to be completed. In light of this lack of access to primary accounting records the results of the Joint Venture for the years ended 31 December 2015 and 31 December 2016 reﬂect the investment in Sahara Resources GOS Inc. at historical cost and the loan note consider- ation payable to Trans Globe and the accrued costs of completing the related acquisition but do not consolidate any share of proﬁts or losses attributable to Sahara Resources GOS Inc. underlying interests in the East Ghazalat licence for the period since 1 July 2015, the eﬀective date of the transaction. The investment is reported at estimated recoverable amounts at the company level. In determining the group carrying value of the interest in equity-accounted joint ventures, and consistent with IFRS 11, this has been written down to £nil by limiting the loss relating to the group share of total comprehensive loss to £137,906 The current liabilities of the Joint Venture at 31 December 2016 primarily reﬂects amounts due to Echo Energy plc in respect of costs incurred by it to third parties in relation to the acquisition by the Joint Venture of Sahara Resources GOS Inc. Summarised ﬁnancial information in relation to the joint venture is presented below: As at 31 December Current assets Non-current assets Current liabilities Non-current liabilities Included in the above amounts are: Cash and cash equivalents Curren t ﬁnancial liabilities ( excluding trade payables) Non-current ﬁnancial liabilities ( excluding trade payables) Net assets ( 100%) Group share of net assets (50%) Year ended 31 December Revenues Loss from continuing operations Total comprehensive loss (100%) Group share of total comprehensive loss (50%) Included in the above amounts are: Depreciation and amortisation Interest income Interest expense Income tax expense 31 December 2016 £ 943,026 1,172,009 (1,734,506) - - (1,734,506) - 380,529 190,265 - (324,272) (324,272) (162,136) - - 143,559 - 31 December 2015 £ 1 2,303,201 (266,124) (2,286,990) - (266,124) (2,286,990) (249,912) (124,956) - (313,969) (313,969) (156,985) - - 36,277 - 33 Notes to the ﬁnancial statements 18. Other receivables Non-current Amounts owing by subsidiary undertakings Amounts provided against Current Amounts due in relation to shares issued Amounts owing by joint venture Other receivables Prepayments 31 December 2016 Group £ - - - 124,884 - 138,126 40,001 303,011 Company £ 5,147,056 (4,073,821) 1,073,235 124,884 - 70,314 40,001 1,308,434 31 December 2015 Group £ Company £ - - - - 216,977 207,530 64,370 488,877 4,605,145 (1,226,189) 3,378,956 - 216,977 107,953 63,864 3,767,750 Other receivables in the group and the company principally comprise recoverable Value Added Tax and expenditure recharged to project partners. The directors consider that the carrying amount of trade and other receivables approximated their fair value. 19. Cash and cash equivalents Bank balances 31 December 2016 31 December 2015 Group £ 184,849 184,849 Company £ 181,424 181,424 Group £ 101,300 101,300 Company £ 94,210 94,210 A charge over bank balances has been registered, for securing all monies due or becoming due from the company to its bankers. 20. Financial instruments and treasury risk management Treasury risk management The group manages a variety of market risks, including the eﬀects of changes in foreign exchange rates, liquidity and counter- party risks. Credit risk The group’s principal ﬁnancial assets are bank balances and cash and other receivables. The credit risk on liquid funds is limited because the counterparties are UK and Italian banks with high credit ratings assigned by international credit rating agencies. The group currently operates with positive cash and cash equivalents as a result of issuing share capital in anticipation of future funding requirements. The group's policy is therefore one of achieving high returns with minimal risks. In order to provide a degree of certainty, the group primarily invests in short-term ﬁxed-interest treasury deposits. As part of this policy, a proportion of the funds has ﬁxed interest rates though these are over short periods of no more than three months. For the purpose of sensitivity analysis, these are treated as ﬂoating rates. The consolidated statement of comprehensive income would be aﬀected by £14 (2015: £35) by a reasonably possible 1 percentage point change in ﬂoating interest rates on a full year basis. The statement of comprehensive income of the parent company would be similarly aﬀected by approximately £14 (2015: £35) by a reasonably possible 1 percentage point change in ﬂoating interest rates on a full year basis. The maximum exposure due to credit risk for the group on other receivables and amounts due from equity accounted joint ventures during the year was £772,703 (2015: £424,507). No collateral is held in respect of these amounts. An impairment adjustment of £2,797,766 (2015: £360,775) has been made in the parent company accounts for the year in respect of amounts not expected to be recoverable. The maximum exposure due to credit risk for the company on inter company receivables and other receivables during the year was £5,147,056 (2015: £8,445,923). No collateral is held in respect of these amounts. Amounts due of £4,073,821 (2015: £39,846) are considered to be impaired and have been provided against in full. All other amounts are expected to be received in full. 34 Notes to the ﬁnancial statements 20. Financial instruments and treasury risk management Currency risks The group's operations are primarily located in the United Kingdom, Italy and Tunisia, with the main exchange risk being between sterling and the euro. Each group company operates primarily within its local currency with little exposure to currency ﬂuctuations other than on inter-group ﬁnancing, with gains or losses thereon being eliminated through reserves on consolida- tion which do not aﬀect earnings. Due to the limited risks to the group, forward exchange contracts are not considered necessary and are not used. The translation risk on the group's foreign exchange payables and receivables is considered to be immaterial due to their short-term nature. As the group does not use foreign exchange hedges, the consolidated statement of comprehensive income would be aﬀected by approximately £1,000 (2015: £13,000) by a reasonably possible 10 percentage point ﬂuctuation in the exchange rate between sterling and the euro on the translation of foreign subsidiary results. The statement of comprehensive income of the parent company would be similarly aﬀected by approximately £2,000 (2015: £236,000) by a reasonably possible 10 percentage point ﬂuctuation in the exchange rate between sterling and the euro on the conversion of loans to foreign subsidiaries and foreign currency bank balances. Liquidity risk The group currently has no operational revenue streams. Operational cash ﬂow represents the ongoing appraisal and testing of the group's projects, assessing target acquisitions and administration costs. The group manages its liquidity requirements by the use of both short-term and long-term cash ﬂow forecasts. The group's policy to ensure facilities are available as required is to issue equity share capital and form strategic alliances in accordance with long-term cash ﬂow forecasts. The group currently has no undrawn committed facilities as at 31 December 2016. The group actively manages its working ﬁnance to ensure the group has suﬃcient funds for operations and planned expansion. The group's ﬁnancial liabilities are primarily trade payables and operational costs. All amounts are due for payment in accor- dance with agreed settlement terms with suppliers or statutory deadlines and all within one year. Derivative ﬁnancial instruments The group does not currently use derivative ﬁnancial instruments as hedging is not considered necessary. Should the group identify a requirement for the future use of such ﬁnancial instruments, a comprehensive set of policies and systems as approved by the directors will be implemented. In accordance with IAS 39, "Financial instruments: recognition and measurement", the group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet speciﬁc requirements set out in the standard. No material embedded derivatives have been identiﬁed. Commodity contracts The group does not use commodity forward contracts and futures to hedge against price risk in commodities as these are not considered necessary. Capital management The group's activities are of a type and stage of development where the most suitable capital structure is that of one entirely ﬁnanced by equities. The directors will reassess the future capital structure when projects under development are suﬃciently advanced. The group considers its capital to consist of share capital only. The group's ﬁnancial strategy is to utilise its resources to further appraise and test the group's projects, forming strategic alliances for speciﬁc projects where appropriate together with assessing target acquisitions. The group keeps investors and the market informed of its progress with its projects through regular announcements and raises additional equity ﬁnance at appropriate times. Categories of ﬁnancial instruments All of the group’s ﬁnancial assets are classiﬁed as loans and receivables, and all of the group’s ﬁnancial liabilities are classiﬁed as ﬁnancial liabilities at amortised cost. 35 Notes to the ﬁnancial statements 21. Trade and other payables Trade payables Amounts owing to subsidiary undertakings Taxation and social security costs Non-trade payables Accurals 31 December 2016 31 December 2015 Group £ 237,971 - 13,537 21,353 155,686 428,547 Company £ 237,369 2 13,537 21,353 139,089 411,350 Group £ 654,784 - 1,674 - 507,605 1,164,063 Company £ 631,482 2 10 - 452,625 1,084,119 Trade payables and accruals principally comprise amounts outstanding for ongoing costs. The directors consider that the carrying amount of trade and other payables approximated their fair value. Trade payables are normally paid between 30 to 60 days of receipt of the invoice. 22. Share capital Issued, called up and fully paid 2,293,749,294 0.01p (2015: 335,924,701 0.1p) ordinary shares 1 January 2016 Equity shares issued Sub-division of capital 31 December 2016 31 December 2016 Group £ Company £ 31 December 2015 Group £ Company £ 2,159,247 271,365 - 2,159,247 271, 365 - 2,430,612 2,430,612 1,051,434 2,931,135 (1,823,322) 2,159,247 1,051,434 2,931,135 (1,823,322) 2,159,247 The holders of 0.01p ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the company. In addition to the 0.01p ordinary shares detailed above, as part of capital reorganisations in 2015 and 2016, 202,591,368 deferred shares with a nominal value of 0.9p and 419,905,876 2016 deferred shares with a nominal value of 0.09p have been created. The deferred shares and the 2016 deferred shares have no value or voting rights and the shareholders were not issued with a share certiﬁcate, nor are they listed on AIM. These shares remain issued, called up and fully paid at the year end. Further shares issued and the sub-division of capital during the year was as follows: Shares issued Shares issued Sub-division of capital Shares issued Shares issued Shares issued Shares issued Shares issued Date Shares 26/02/2016 6,000,000 03/03/2016 77,981,175 Price 0.6p 0.12p 25/04/2016 419,905,876 0.1p to 0.01p 16/05/2016 245,788,895 0.1p and 0.25p 01/06/2016 144,428,571 0.048p and 0.168p 03/06/2016 452,380,952 0.048p 18/07/2016 73,000,000 0.3p to 0.6p 09/12/2016 958,245,000 0.08p 23. Share premium account 1 January 2016 Premium arising on issue of equity shares Transaction costs 31 December 2016 31 December 2016 31 December 2015 Group £ 16,628,623 1,003,029 (9,889) 17,621,763 Company £ 16,628,623 1,003,029 (9,889) 17,621,763 Group £ 16,302,050 405,334 (78,761) Company £ 16,302,050 405,334 (78,761) 16,628,623 16,628,623 36 Notes to the ﬁnancial statements 24. Share-based payments (a) Share Options The share option scheme, which was adopted by the company on 25 November 2005, was established to reward and incentivise the executive management team for delivering share price growth. The share option scheme is administered by the Remuneration Committee. On 4 March 2013 the company issued 200,000 share options to W Coleman upon his appointment to the board as chief executive oﬃcer. On 10 October 2014 the company issued 4,205,734 share options in total to the directors, key management personnel and their service companies as follows: Individual W Coleman (director) O Franks (director) F McCole (key management personnel) Rocky Mountain Limited (company controlled by B Hepp, key management personnel) Number of options granted 2,628,583 525,717 525,717 525,717 4,205,734 On 27 February 2015, the company issued 1,050,000 share options to non-director and non-key management personnel. Details of the tranches of share options outstanding at the year end are as follows: Date of Grant 3/4/2013 10/10/2014 2/27/2015 01/01/12016 Number of options 200,000 4,205,734 1,050,000 Issued/lapsed in the year - (525,717) - 31/12/2016 Number of options 200,00 3,680,017 1,050,000 Date from which options may be ﬁrst exercised 04/03/2013 10/10/2015 27/02/2016 Lapse date Exercise price per option 03/03/2023 10/10/2024 27/02/2025 1p 3p 3p The options outstanding at the end of the year have a weighted average remaining contractual life of 0.75 years for the options issued on 10 October 2014, and 1.17 years for the options issued on 27 February 2015. Those issued on 4 March 2013 are considered to have no remaining contractual life. The fair values of the options granted on 4 March 2013 were calculated using the Black-Scholes option pricing model. The inputs into the model were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividend yield 10.62p 1p 92.00% 10 years 2.10% Nil The fair values of the options granted on 10 October 2014 were calculated using the Black-Scholes option pricing model. The inputs into the model were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividend yield 2.12p 3p 85.00% 10 years 2.22% Nil The average fair value of share options granted in the year was 1.716p each. The outstanding share options are not subject to any share-performance related vesting conditions but vesting is conditional upon continuity of service. 37 Notes to the ﬁnancial statements 24. Share-based payments The expected volatility was determined with reference to the company's share price since it was admitted for trading on AIM in December 2005. The expected life used in the model has been adjusted, based on management's best estimate, for the eﬀects of non-transferability, exercise restrictions and behavioural considerations. The fair values of the options granted on 27 February 2015 were calculated using the Black-Scholes option pricing model. The inputs into the model were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividend yield 1.62p 3p 87.00% 10 years 1.73% Nil The average fair value of share options granted in the year was 1.28p each. The outstanding share options are not subject to any share-performance related vesting conditions but vesting is conditional upon continuity of service. The expected volatility was determined with reference to the company's share price since it was admitted for trading on AIM in December 2005. The expected life used in the model has been adjusted, based on management's best estimate, for the eﬀects of non-transferability, exercise restrictions and behavioural considerations. The group recognised total expenses of £21,477 (2015: £45,942) related to equity-settled, share-based payment transactions relating to share options during the year. A deferred taxation asset has not been recognised in relation to the charge for share-based payments due to the availability of tax losses available to be carried forward. (b) Warrants over ordinary shares The company issued warrants over ordinary shares to the company to subscribers of new ordinary shares and as fundraising commission in respect of equity fundraisings completed during the years to 31 December 2015 and 31 December 2016. On 8 May 2015 the company issued warrants to subscribe for 9,200,000 ordinary shares at an exercise price of 1.50p. On 8 May 2015 the company issued warrants to subscribe for 4,000,000 ordinary shares at an exercise price of 1.20p. On 28 May 2015 the company issued warrants to subscribe for 30,800,000 ordinary shares at an exercise price of 1.50p. On 21 July 2015 the company issued warrants to subscribe for 8,724,019 ordinary shares at an exercise price of 1.50p. On 18 November 2015 the company issued warrants to subscribe for 133,333.333 ordinary shares at an exercise price of 1.00p. On 18 November 2015 the company issued warrants to subscribe for 6,000,000 ordinary shares at an exercise price of 0.72p. On 9 December 2016 the company issued warrants to subscribe for 958,245,000 ordinary shares at an exercise price of 0.12p. On 9 December 2016 the company issued warrants to subscribe for 47,912,250 ordinary shares at an exercise price of 0.08p Details of the tranches of warrants outstanding at the year-end are as follows: 01 January 2016 Number of warrants 9,200,000 4,000,000 30,800,000 8,724,019 133,333,333 6,000,000 Date of Grant 08/05/2015 08/05/2015 28/05/2015 21/07/2015 16/11/2015 16/11/2015 09/12/2016 09/12/2016 Issued/lapsed in the year 31 December 2016 Number of warrants Date from which warrants may be ﬁrst exercised Lapse date Exercise price per warrants 9,200,000 4,000,000 30,800,000 8,724,019 133,333,333 6,000,000 958,245,000 47,912,250 08/05/2015 08/05/2015 28/05/2015 21/07/2015 16/11/2015 16/11/2015 09/12/2016 09/12/2016 28/05/2017 28/05/2018 28/05/2017 28/05/2017 18/11/2017 18/11/2018 09/12/2018 09/12/2018 1.50p 1.20p 1.50p 1.50p 1.00p 0.72p 0.12p 0.08p 958,245,000 47,912,250 38 Notes to the ﬁnancial statements 24. Share-based payments A charge to the proﬁt and loss account has been taken in compliance with IFRS2 in respect of the fair value of warrants issued to brokers in relation to fundraising services provided as set out below: The fair value of the 1.20p warrants issued on 8 May 2015 was calculated using the Black-Scholes option pricing model. The inputs into the model were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividend yield 1.05p 1.20p 88.00% 3 years 1.93% Nil The average fair value of warrants granted was 0.57p each. The fair value of the 0.72p warrants issued on 18 November 2015 was calculated using the Black-Scholes option pricing model. The inputs into the model were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividend yield 0.60p 0.72p 85.00% 3 years 1.95% Nil The average fair value of warrants granted was 0.31p each. The fair value of the 0.12p warrants issued on 9 December 2016 was calculated using the Black-Scholes option pricing model. The inputs into the model were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividend yield 0.08p 0.12p 125.00% 2 years 1.46% Nil The average fair value of warrants granted was 0.041p each. The group recognised total expenses of £Nil (2015: £5,686) related to equity-settled, share-based payment transac- tions relating to warrants over ordinary shares during the year. A deferred taxation asset has not been recognised in relation to the charge for share-based payments due to the availability of tax losses available to be carried forward. 39 Notes to the ﬁnancial statements 25. Financial commitments Lease commitments The group leases all of its properties. The terms of property leases vary from country to country, although they all tend to be tenant-repairing with rent reviews annually and many have break clauses. The total future minimum lease payments are due as follows: Not later than one year 31 December 2015 £ - 31 December 2016 £ 112,234 The minimum lease payment recognised as an expense in the year was £119,932 (2015: £112,431). Work programme commitment In Tunisia, Independent Resources (Ksar Hadada) Limited holds a 100 per cent interest in a production sharing contract (“PSC”) with the Entreprise Tunisienne d’Activites Petrolieres (“ETAP”), the Tunisian national oil company. The Company has a remaining- commitment to acquire 300 square kilometres of 3D seismic and drill two wells with a minimum work programme expenditure commitment of $8 million. Independent Resources (Ksar Hadada) Ltd has until 7 August 2017 to meet its commitment. If the Company is unable to fulﬁl this work programme or be granted an extension beyond 7 August 2017 on acceptable terms, the Ksar Hadada Permit will expire. 26. Related party transactions Inter-group balances In order for individual subsidiary companies to carry out the objectives of the group, amounts are loaned to them on an unsecured basis. At the year end the following amounts were outstanding: Amounts owed to Echo Energy Plc from: Independent Energy Solutions srl Independent Gas Management srl Independent Resources (Ksar Hadada) Limited Rivara Gas Storage srl 31 December 2015 £ - - 1,073,235 - 1,073,235 31 December 2016 £ - 2,325,745 1,031,704 21,507 3,378,956 Echo Energy plc charges interest on the inter-group borrowings at an average rate of 2.389% which totalled £57,187 (2015: £92,336) for the year which has been included in the company's own income statement but eliminated upon consolidation. Echo Energy plc has provided against an amount due from Independent Resources (Ksar Hadada) Limited as at 31 December 2016 amounting to £1,186,703 (2015: £1,186,703), Independent Energy Solutions srl at 31 December 2016 amounting to £39,486 (2015: £39,486), Independent Gas Management srl at 31 December 2016 amounting to £2,770,190 (2015: £Nil) and Rivara Gas Storage srl at 31 December 2016 amounting to £77,442 (2015: £Nil) as management has assessed this amount to be irrecover- able. The directors are key management personnel, for their remuneration please see note 4 40 Notes to the ﬁnancial statements 26. Related party transactions Consultancy fees of £9,500 (2015: £30,500) were paid to Mars Omega LLP, a strategic consultancy partnership of which Owain Franks is a member and non-executive Chairman in relation to strategic and commercial due diligence on Group projects and potential acquisitions. Brian Hepp and Feilim McCole, whilst not directors of the company under the Companies Act 2006, are considered to be key management personnel. Details of the commercial arrangements between them and the company are detailed below: Salary payments of £107,242 (2015: £119,166) were made during the year to Feilim McCole, Finance Director of the company. During this ﬁnancial year, consultancy fees of £172,040 (2015: £133,106) were paid to Rocky Mountain Limited, a company controlled by Brian Hepp, Chief Operations Oﬃcer for the company. 27. Contingencies Upon acquiring certain participating interests in the Ksar Hadada permit by Independent Resources (Ksar Hadada) Limited from Derwent Resources (Ksar Hadada) Limited and GAIA srl, a company controlled by R Bencini, it was agreed that payments that could amount to $1 million (£675,226) to each company were to be dependent upon drilling and development milestones. Given the revised focus on Ksar Hadada and the anticipated change to the group's interests and it becoming the operator it is possible that some milestones will be reached and payments will fall due to be paid. The milestones and consideration, for each company, are as follows: • Drilling consideration due upon spudding the ﬁrst well of $50,000 (£32,900) (paid previously); • Discovery consideration due upon ﬁrst ﬂowing hydrocarbons to the surface of $100,000 (£85,565); and • Commerciality consideration due upon granting of an operating concession of $850,000 (£727,303). 28. Controlling party The directors do not consider there to be a controlling party. 29. Subsequent events On 1 February 2017 the company announced the issue of 57,699,283 new ordinary shares of 0.01p each in settlement of a supplier liabilities. On 6 March 2017 the company announced the issue of 1,002,971,638 new ordinary shares of 0.01p each to raise proceeds of approximately £650,000 from an institutional investor. The company also entered into a loan agreement with that investor for £1,000,000 over a three year term at an annual coupon of 12% with a 5% commitment fee. As part of this agreement the company granted 1,538,461,538 warrants. On 14 March 2017 the company announced an open oﬀer making available 2,236,280,127 new ordinary shares of 0.01p each in anticipation of raising approximately £1,450,000 gross proceeds. The company also announced the exercise of 507,250,000 warrants at an exercise price of 0.12p for a total consideration of £608,700. On 20 March 2017 the company announced the exercise of 22,750,000 warrants at an exercise price of 0.12p for a total consideration of £27,300.00. On 18 April 2017, the company announced a Latin American gas strategy focused on multi Tcf (trillion cubic feet), low cost, onshore gas piped to high value, growing markets. Simulta- neously, and in support of this strategy, the company announced a non-binding heads of terms relating to a £23million institutional funding. On 15 May 2017 the company announced that it had entered into an institutional loan arrangement under which Greenber- ry plc ("Greenberry") has agreed to subscribe for a total of up to €20,000,000 principal secured loan notes with an aggregate principal amount of €15,000,000 with the right to purchase (up to 9 June 2017) from the company additional loan notes in an aggregate principal amount not exceeding €5,000,000 (the “Greenbury Loan Notes”). Following completion of the documentation and approval of a prospec- tus by the Luxembourg Stock Exchange, it is anticipated that the Greenberry Loan Notes will be admitted to the Oﬃcial List of the Luxembourg Stock Exchange and traded on the Luxembourg Stock Exchange Euro MTF Market. The Greenberry Loan Notes will be due for repayment on a date not exceeding ﬁve years from their date of issue, expected to be on or around 15th May 2022. The company will have the right to redeem the Greenberry Loan Notes at any time provided that it has adhered to certain terms of redemption. The Greenberry Loan Notes will be secured pursuant to a charge over the entire issued share capital of Echo Energy Holdings (UK) Limited, a wholly-owned subsidiary of the Company, which is intended to be used for the acquisition of assets in South America. On 19 May 2017 the company announced the signature of £10,000,000 institutional placing of new equity to Pegasus A. Fund Ltd. SAC ("Pegasus"), a Bahamas based institutional investor. On 19 May 2017 the company announced that it had agreed to issue warrants in favour of Greenberry as part of the institutional funding described in that announcement at an exercise price of £0.006075. On 22 May 2017 the company’s shareholders approved the issue of 2,469,135,802 new ordinary shares at a price of £0.004050 per share to raise gross proceeds of approximately £10,000,000 In addition, the company announced that it had agreed to issue 1,234,567,901 ﬁve-year warrants to Pegasus, each with an exercise price of £0.006075 per warrant (150% of the issue price). At a General Meeting on 22 May 2017 company’s sharehold- ers approved a resolution to re-organise the share capital of the company by consolidating all of the existing ordinary shares as at close of business on 22 May 2017 into ordinary shares of 0.25 pence on the basis of one consolidated share for every 25 existing ordinary shares, such shares having the same rights and being subject to the same restrictions (save as to nominal value) as the existing ordinary shares. Following the consolidation, the number of warrants in issue will be adjusted in line with the ratio of the consolidation and the exercise price of each issued warrant will be adjusted accordingly. On 25 May 2017 the company issued 40,303,325 (post consolidation of the share capital) warrants to Greenberry in connection with the arrangements associated with the £1m secured loan, announced on 6 March 2017. 41

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