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