Enwell Energy plc
Registered number 4462555
Annual Report and Financial Statements
for the year ended 31 December 2024
1
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Contents
Strategic Report
-
Highlights
2
-
Chairman’s Statement
4
-
Chief Executive’s Statement
8
-
Business Model
11
-
Our Strategic Priorities
13
-
Overview of Assets
15
-
Overview of Reserves
18
-
Finance Review
21
-
Key Performance Indicators
24
-
Sustainability
25
-
Principal Risks and Uncertainties
29
-
Statement Under S172(1) of the Companies Act 2006
37
Corporate Governance
Board of Directors
40
Corporate Governance Statement
42
Directors’ Report
48
Independent Auditors’ Report
51
Financials
Consolidated Income Statement
59
Consolidated Statement of Comprehensive Income
60
Company Statement of Comprehensive Income
60
Consolidated Balance Sheet
61
Consolidated Statement of Changes in Equity
62
Consolidated Cash Flow Statement
63
Company Balance Sheet
64
Company Statement of Changes in Equity
65
Company Cash Flow Statement
66
Notes forming part of the financial statements
67
Corporate Information
109
Glossary
110
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Strategic Report
Highlights
Operational
•
Aggregate average daily production of 2,288 boepd (calculated on the days when the Group’s fields
were actually on production) (2023: 2,644 boepd (calculated on the days when the Group’s fields were
actually in production))
•
Aggregate production volumes for the year of 722,753 boe (2023: 885,610 boe)
•
Successful workover of MEX-102 well to access previously productive horizon producing light oil
Financial
•
Revenue of $44.9 million (2023: $62.2 million), down 28%, primarily as a result of lower production
rates and gas prices
•
Gross profit of $28.2 million (2023: $39.0 million), down 28%
•
Operating profit of $29.1 million (2023: $35.5 million), down 18%, predominantly as a result of lower
production rates and gas prices
•
Net profit of $23.7 million (2023: $26.5 million), down 10%
•
Cash and cash equivalents of $99.4 million as at 31 December 2024 (2023: $76.5 million), and of
$102.1 million as at 2 June 2025
•
Average realised gas, condensate, oil and LPG prices in Ukraine were $318/Mm3 (UAH12,767/Mm3),
$101/bbl, $69/bbl and $92/boe respectively (2023: $394/Mm3 (UAH14,426/Mm3) gas, $71/bbl
condensate and $98/boe LPG)
Outlook
•
The Russian invasion of Ukraine in February 2022 has had a significant impact on all aspects of life
in Ukraine, including the Group’s business and operations. The scale and duration of disruption to the
Group’s business continues to be difficult to predict, and there remains significant uncertainty about
the outcome of the war in Ukraine
•
In November 2024, the Ukrainian authorities issued orders to suspend the MEX-GOL, SV and VAS
production licences, and consequently all work at these licences is currently suspended. This followed
similar regulatory action against the Group in April and May 2023, when the VAS production licence
and SC exploration licence were suspended from May 2023 until June 2024
•
Further work on the MEX-GOL, SV and VAS licences will remain suspended until there is a resolution
of the regulatory issues, including the lifting of the suspension orders
•
The Group is continuing to pursue legal proceedings to challenge the suspension orders, including
investigating the possibility of seeking further interim measures to allow restoration of its operations at
the MEX-GOL, SV and VAS fields
•
At the SC exploration licence area, planning for the development of the licence area is continuing
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
•
Currently, the Group retains a significant proportion of its cash outside Ukraine, which enhances the
Group’s ability to navigate the current risk environment for the foreseeable future, and provides a
material buffer to any further disruptions to the Group’s operations
•
The Group’s development programme for the remainder of 2025 and 2026 is expected to be funded
from existing cash resources and operational cash flow
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Chairman’s Statement
I am pleased to present the 2024 Annual Report and Financial Statements, although the situation in respect
of the Group’s business in Ukraine is currently very challenging. The ongoing war in Ukraine presents a very
difficult operating environment and worrying outlook, and I am greatly saddened by the terrible events occurring
there.
The war has had a significant impact on all aspects of life in Ukraine, including the Group’s business and
operations. The overall scale and duration of disruption to the Group’s business continues to be difficult to
predict, and there remains significant uncertainty about the outcome of the war.
Notwithstanding the disruption caused by the war, during 2024, the Group continued with some development
activities at the MEX-GOL and SV fields. The workover of the MEX-102 well to gain access to the previously
productive V-19 and V-20 horizons in the Visean formation was completed, and this allowed access to one
interval in the V-19 horizon and three intervals in the V-20 horizon. Testing of the V-19 horizon showed
encouraging gas and light oil flows, and the well was hooked up for longer-term production testing. Additionally,
at the MEX-GOL field, planning continued for the deepening of the MEX-109 well to explore a deeper horizon
and the evaluation of the potential for sidetracking of the MEX-119 well to access additional reserves. At the
SV field, the potential for hydraulic fracturing of the SV-29 development well was evaluated.
The VAS production licence and SC exploration licence were suspended by regulatory actions of the Ukrainian
authorities in May 2023, and so there were no activities on these licences in the first half of the year. However,
these suspensions were lifted in late June 2024, allowing the resumption of production at the VAS field, and
the recommencement of development work at the SC licence area, which includes planning for the installation
of gas processing facilities and other surface infrastructure.
However, in November 2024, the MEX-GOL, SV and VAS production licences were suspended by the
Ukrainian authorities. The Group commenced legal proceedings to challenge these suspensions, which
resulted in interim rulings to temporarily lift such suspensions, but unfortunately, the interim rulings in respect
of the MEX-GOL and SV licences were overturned in January 2025 and in respect of the VAS licence in
February 2025. Consequently, all operational activity is currently suspended at these licences.
Aggregate average daily production (calculated for the days when the fields were actually on production) from
the MEX-GOL, SV and VAS fields during the year was 2,288 boepd, which is lower than the aggregate daily
production rate of 2,644 boepd achieved during 2023 due to the disruption caused by the war, natural field
decline and the various suspensions of the MEX-GOL, SV and VAS field operations during the year. The
aggregate production volumes for the year were 722,753 boe, which is lower than the aggregate production
volumes of 885,610 boe in 2023 for the same reasons.
There was also a significant decline in gas prices during the year further contributing to the decline in revenues
to $44.9 million (2023: $62.2 million). The Group’s net profit was lower at $23.7 million (2023: $26.5 million)
and operating profit was also lower at $29.1 million (2023: $35.5 million). Cash generated from operations
declined to $33.0 million (2023: $62.9 million) for the same reason.
Whilst the Group’s operational activities continued broadly in line with 2023, development activity was
significantly impacted by the increase in risks faced by the Group in Ukraine.
There is significant disruption to the fiscal and economic environment in Ukraine due to the ongoing war, and
while the economy grew during the year, the inflation rate increased and the Ukrainian Hryvnia weakened
further against other currencies. It is likely that fiscal and economic uncertainties will continue until the hostilities
cease.
In recent years, the Ukrainian Government implemented a number of reforms in the oil and gas sector, which
include the deregulation of the gas supply market and simplification of the regulatory procedures applicable to
oil and gas exploration and production activities in Ukraine. The deregulation of the gas supply market,
supported by electronic gas trading platforms, has improved pricing transparency in Ukraine.
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
During 2024, Ukrainian gas prices weakened as the Ukrainian gas market adapted to the prevailing demand
and supply conditions. However, condensate prices were higher, while LPG prices were lower, by comparison
to the previous year for similar reasons.
Restructuring of Smart Holding Group
In January 2023, the Company was notified that there had been a restructuring of the ownership of the PJSC
Smart-Holding Group, a member of which held a major shareholding in the Company, and which was ultimately
controlled by Mr Vadym Novynskyi (“Mr Novynskyi”). Under this restructuring, which occurred with effect from
1 December 2022, Mr Novynskyi disposed of his major indirect shareholding interest in the Company to two
trusts registered in Cyprus named the SMART Trust and the STEP Trust (the “Trusts”). Further information is
contained in the Company’s announcement dated 17 January 2023, and the TR-1 Forms published on 26
January 2023, 31 July 2023 and 20 March 2024.
Regulatory Actions by Ukrainian Authorities and Suspensions of Licences
In early December 2022, the Ukrainian Government imposed sanctions on Mr Novynskyi, as set out in the
Company’s announcement dated 9 December 2022.
As announced on 4 January 2023, new legislation, Law No. 2805-IX, relating to the natural resources sector
was enacted in Ukraine, which came into force on 28 March 2023. This legislation is a substantial package of
new procedures and reforms designed to improve the regulatory process relating to the exploration and
development of natural resources in Ukraine. However, the legislation includes provisions that if the ultimate
beneficial owner of a mineral or hydrocarbon licence becomes the subject of sanctions in Ukraine, then the
State Geologic and Subsoil Survey of Ukraine (the “SGSS”) may suspend or revoke that licence.
Following Law No. 2805-IX coming into force on 28 March 2023, the Ukrainian authorities have taken a number
of regulatory actions against a number of the Group’s subsidiary companies in Ukraine.
As announced on 12 April 2023, such regulatory actions included conducting a search at the Group’s Yakhnyky
office, from where the MEX-GOL and SV fields are operated, and placing certain physical assets of the
Ukrainian branch (representative) office of Regal Petroleum Corporation Limited (“RPC”) and LLC Arkona Gas-
Energy (“Arkona”) (which respectively hold the MEX-GOL and SV fields and the SC exploration licence) under
seizure, thereby restricting any actions that would change registration of the property rights relating to such
assets, although the use of such assets was not restricted and therefore the Company was able to continue
to operate the fields. In addition, the Ministry of Justice of Ukraine (the “MoJ”) made an order cancelling the
registration entry made on behalf of a subsidiary of the Company named LLC Regal Petroleum Corporation
(Ukraine) Limited in the Unified State Register of Legal Entities, Individuals–entrepreneurs and Civil Institutions
of Ukraine (the “State Register”) relating to the ultimate beneficial owners of such company, which were stated
as being the trustees (the “Trustees”) of the Trusts as previously notified to the Company, thereby restoring
the previous entry in the State Register, Mr Novynskyi.
On 2 May 2023, the MoJ made further orders cancelling the registration entry made on behalf of three further
Ukrainian subsidiaries of the Company named LLC Prom-Enerho Produkt (“PEP”), Arkona and LLC Well
Investum (“Well Investum”) respectively in the State Register relating to the ultimate beneficial owners of such
companies, which again were stated as being the Trustees of the Trusts, thereby restoring the previous entry,
Mr Novynskyi. PEP holds the VAS production licence, Arkona holds the SC exploration licence and Well
Investum is a dormant company.
Following the issuance of the abovementioned orders by the MoJ, Mr Novynskyi was registered in the State
Register as the ultimate beneficial owner of each of PEP and Arkona, and was consequently recognised by
the SGSS as the ultimate beneficial owner of each of the VAS production licence and SC exploration licence.
As a result, on 4 May 2023, the SGSS issued orders suspending the VAS production licence and SC
exploration licence for a period of five years effective from that date.
However, on 26 June 2024, the SGSS issued orders to renew the validity of each of the VAS production licence
and SC exploration licence, thereby cancelling the suspensions of those licences, and enabling the resumption
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
of operational activities at those licences. Further information is contained in the Company’s announcement
dated 27 June 2024.
In September 2024, new legislation came into force which requires that branches (or offices) of foreign
companies operating in Ukraine register their ultimate beneficial owners in the State Register. RPC, which
holds the MEX-GOL and SV licences, operates such a branch and therefore registered the Trustees of the
Trusts as its ultimate beneficial owners in the State Register, based on the notifications made by the Trustees
to the Company and published to the market on 26 January 2023, 31 July 2023 and 20 March 2024.
On 8 October 2024, the Ukrainian Government imposed sanctions on the Trustees, as set out in the
Company’s announcement dated 11 October 2024.
On 15 November 2024, the SGSS issued orders to suspend the MEX-GOL, SV and VAS production licences
for a period of ten years effective from 8 October 2024 pursuant to Law No. 2805-IX, based on the sanctions
imposed on the Trustees of the Trusts. Further information is contained in the Company’s announcement dated
18 November 2024.
Following receipt of the suspension orders, the Company issued legal proceedings in the Poltava District
Administrative Court in Ukraine to challenge such orders, and within such proceedings, the Company obtained
interim rulings (the “Interim Rulings”) to lift the suspensions of the MEX-GOL, SV and VAS production licences
pending determination of the substantive issues in the legal proceedings, as set out in the Company’s
announcement dated 26 November 2024.
The SGSS appealed against the Interim Rulings in the Second Appeal Administrative Court in Ukraine. By a
decision dated 22 January 2025, the appeal against the Interim Ruling relating to the MEX-GOL and SV
licences was allowed, and by a decision dated 27 February 2025, the appeal against the Interim Ruling relating
to the VAS licence was also allowed. As a result, the respective suspension orders in respect of the MEX-
GOL, SV and VAS licences were reinstated, and the Company ceased all field operations on those licences
immediately following the respective appeal decisions.
The Company is continuing its legal proceedings to challenge the suspension orders, including investigating
the possibility of pursuing further interim measures to allow restoration of its operations, and continuing to
consult with its external legal and other advisers to seek to mitigate the risks associated with the regulatory
actions of the Ukrainian authorities.
Board and Management Changes
In March 2024, Chris Hopkinson stepped down as Non-Executive Chairman of the Board, and Sergii Glazunov
stepped down as Chief Executive Officer and a Director, and I joined the Board as Non-Executive Chairman
and Igor Basai joined the Board as a Non-Executive Director. In addition, at that time, Oleksiy Zayets was
appointed as Interim Chief Executive Officer, and, since then, his role has become permanent.
In October 2024, Yuliia Kirianova stepped down as a Non-Executive Director and Oleksiy Zayets was
appointed as a Director.
In January 2025, Igor Basai stepped down as a Non-Executive Director and Oleksandr Blyzniuk was appointed
as a Non-Executive Director.
On behalf of the Board, I would like to thank Chris, Sergii, Yuliia and Igor for their valued contributions during
their respective tenures with the Company, and to welcome Oleksiy and Oleksandr to the Board.
Outlook
The ongoing war in Ukraine creates a devastating humanitarian situation in Ukraine, as well as extreme
challenges to the social, fiscal, economic and business environment. This has been exacerbated in respect of
the Group by the regulatory actions of the Ukrainian authorities, culminating in the suspension of the MEX-
GOL, SV and VAS production licences.
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Under these circumstances, it is extremely difficult to plan future investment and operational activities at the
Group’s fields. However, subject to resolution of the current regulatory issues with the Ukrainian authorities,
and it being safe to do so, the Group is planning to undertake further limited development activities during the
remainder of 2025 and beyond in order to continue the development of its fields. In doing so, the Group is
taking and will take all measures available to protect and safeguard its personnel and business, with the safety
and wellbeing of its personnel and contractors being paramount. The Group retains a significant proportion of
its cash reserves outside Ukraine, and this provides a material buffer to any further disruptions to the Group’s
operations. This has enabled the Board to reach the opinion that the Group has sufficient resources to navigate
the current risk environment for the foreseeable future.
In conclusion, on behalf of the Board, I would like to thank all of our staff for their continued dedication and
efforts during 2024, especially their remarkable courage and fortitude during the ongoing war in Ukraine.
Chuck Valceschini
Chairman
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Chief Executive’s Statement
Introduction
The war in Ukraine, as well as adverse regulatory actions by the Ukrainian authorities, have materially
disrupted the Group’s development activity at its Ukrainian fields during 2024. During the year, such regulatory
actions resulted in the suspensions of (i) the VAS and SC licences between 4 May 2023 and 26 June 2024,
and (ii) the MEX-GOL, SV and VAS licences between 15 November 2024 and 25 November 2024, during
which periods there was no production from these respective fields. Subsequently, the suspensions of the
MEX-GOL and SV licences were reinstated on 22 January 2025, and of the VAS licence on 27 February 2025,
and currently there are no production operations at these fields.
However, during the year, production operations and some development activities at the MEX-GOL and SV
fields were undertaken, and this enabled the completion of the workover of the MEX-102 well to gain access
to the previously productive V-19 and V-20 horizons in the Visean formation. Testing of the V-19 horizon
showed encouraging gas and light oil flows, and the well was hooked up to the gas processing facilities to
undergo longer-term testing to establish its optimal operating parameters. During testing, the well was
producing 0.1 MMscf/d of gas and 218 bbl/d of oil.
At the VAS field, intermittent production operations continued during the periods when the VAS production
licence was not suspended, but unfortunately, all operations at the VAS field have been suspended since late
February 2025.
After the suspension of the SC exploration licence was lifted in late June 2024, development work resumed.
This work includes planning for the installation of new gas processing facilities and other surface infrastructure
as well as assessing the feasibility of an alternative option to connect to existing gas processing facilities.
Overall production in 2024 was lower than in 2023 due to the disruption to production operations caused by
the war in Ukraine, natural field decline and the suspensions of the MEX-GOL, SV and VAS production
licences.
Quality, Health, Safety and Environment (“QHSE”)
The Group is committed to maintaining the highest QHSE standards and the effective management of these
areas is an intrinsic element of its overall business ethos. The Group’s QHSE policies and performance are
overseen by the Health, Safety and Environment Committee. Through strict enforcement of the Group’s QHSE
policies, together with regular management meetings, training and the appointment of dedicated safety
professionals, the Group strives to ensure that the impact of its business activities on its staff, contractors and
the environment is as low as is reasonably practicable. The Group reports safety and environmental
performance in accordance with industry practice and guidelines.
I am pleased to report that no Lost Time Incidents were recorded in 2024, with a total of 351,694 safe man-
hours worked during the year. Cumulatively, the number of man-hours worked since the last Lost Time Incident
is now in excess of 5.4 million man-hours. No environmental incidents were recorded during the year.
Production
The average daily production of gas, condensate, oil and LPG for the 356 days that the MEX-GOL and SV
fields were producing (365 days in 2023) and the 143 days that the VAS field was producing (124 days in
2023), over the 2024 year, is shown below:
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Field
Gas
(MMscf/d)
Condensate*
(bbl/d)
LPG**
(boe/d)
Aggregate
boepd
2024
2023
2024
2023
2024
2023
2024
2023
MEX-
GOL &
SV
8.3
9.5
480
368
194
266
2,146
2,314
VAS
0.7
1.7
6
18
-
-
142
330
Total
9.0
11.2
486
386
194
266
2,288
2,644
*Condensate includes light oil from well MEX-102 which commenced production in late October 2024
** There was no LPG production in November and December 2024 due to a delay in renewal of the LPG production licence
As a result of the continued operational disruptions caused by the war, regulatory actions and deferment of
development work, the Group’s average daily production rate for the 2024 year declined. During the year,
regulatory actions taken by the Ukrainian authorities resulted in the suspension of (i) the VAS and SC licences
between 4 May 2023 and 26 June 2024, and (ii) the MEX-GOL, SV and VAS licences between 15 November
2024 and 25 November 2024, during which periods there was no production from the respective fields.
Aggregate production volumes for the year were 722,753 boe, which is lower than the aggregate production
volumes of 885,610 boe in 2023 for the reasons set out above.
Operations
The war in Ukraine has significantly affected fiscal and economic stability in Ukraine, and the oil and gas sector
in Ukraine has been particularly affected by interruptions to power supplies, the unavailability of oil field
equipment and services and disruptions to the markets, including weaker demand, for the sale of gas,
condensate, oil and LPG. These disruptions impacted the Group’s realised hydrocarbon prices in Ukraine, in
turn impacting the Group’s revenues and profitability during the year.
During 2024, the Group continued to refine its geological subsurface models of the MEX-GOL, SV and VAS
fields, as well as the SC licence area, in order to enhance its strategy for the further development of such fields
and licence area, including the timing and level of future capital investment required to exploit the hydrocarbon
resources.
At the MEX-GOL and SV fields, the workover of the MEX-102 well to gain access to the previously productive
V-19 and V-20 horizons in the Visean formation was completed. These horizons had previously been isolated
from the producing V-23 horizon. The workover allowed access to one interval in the V-19 horizon and three
intervals in the V-20 horizon, and these intervals were tested, with encouraging gas and light oil flows achieved
in testing of the V-19 horizon. The flows of light oil are interesting, as this is the only oil producing horizon in
the field, although the light oil is similar in composition but slightly denser than the condensate in the field.
During testing, the well was producing 0.1 MMscf/d of gas and 218 bbl/d of oil.
The Group continued to operate each of the SV-2 and SV-12 wells under joint venture agreements with NJSC
Ukrnafta, the majority State-owned oil and gas producer. Under the agreements, the gas and condensate
produced from the respective wells is sold under an equal net profit sharing arrangement between the Group
and NJSC Ukrnafta, with the Group accounting for the hydrocarbons produced and sold from the wells as
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
revenue, and the net profit share due to NJSC Ukrnafta being treated as a lease expense in cost of sales.
However, following the SV-2 well experiencing water ingress, a workover of this well was undertaken to replace
the production string and remove obstructions in the well, but this work was unsuccessful and the well is now
shut in, and further remedial work is not being considered at the present time.
At the VAS field, during the year production operations resumed after the lifting of the suspension of the licence
in late June 2024, although there was a further period of suspension in November 2024.
At the SC exploration licence area, after the lifting of the suspension of the licence in late June 2024,
development work resumed, and this included planning for the installation of new gas processing facilities and
other surface infrastructure as well as assessing the feasibility of an alternative option to connect to existing
gas processing facilities.
Outlook
The ongoing war in Ukraine has caused significant disruption to the country as a whole and to the Group’s
business activities, and until there is a resolution to the war, the disruption and uncertainty are likely to continue.
Subject to resolution of the current regulatory issues with the Ukrainian authorities and it being safe to do so,
during the remainder of 2025 and 2026, the Group plans to continue the development of its fields to the extent
it is possible to do so.
However, such work at the MEX-GOL, SV and VAS fields, will remain suspended until there is a resolution of
the regulatory issues, including the lifting of the suspension orders made in respect of those licences.
At the SC licence area, the work on development plans for the licence area will continue.
Finally, I would like to add my thanks to all of our staff for the continued hard work and dedication they have
shown over the course of 2024, and to especially recognise their continuing efforts and professionalism in the
face of the extremely challenging current situation in Ukraine.
Oleksiy Zayets
Chief Executive Officer
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Business Model
Activities
Exploration
We aim to identify new opportunities within our fields by accurate geological and geophysical analysis and
modelling to achieve a high probability of success
Appraisal
We pursue methodical analysis and review of drilling results to refine our subsurface models and ensure that
discoveries are adequately appraised prior to development
Development
We carefully plan our development activities using tailored drilling techniques and extraction processes so as
to fully exploit our reserve base, safely and economically
Production
We continually monitor production results to manage reservoir performance and maximise extraction rates, as
well as reviewing processing facilities to optimise recoveries
Resources
Large reserves
Our proved and probable (2P) reserves are approximately 57 MMboe and will be commercialised through
careful and incremental development
Cutting edge technology
We use modern, innovative technology and processes in our development activities, and encourage the
investigation and adoption of new methods by our staff
Detailed budgeting process
A detailed budgeting process is essential to cost forecasting and performance discipline and to enable fiscal
control of our business
Highly experienced team
We have well qualified and experienced technical management to plan and supervise operational activities.
Additionally, we engage with suitably qualified local and international geological, geophysical and engineering
experts and contractors to supplement and broaden the pool of expertise available to us
100% operatorship of assets
Through our 100% operatorship of our fields, we have the ability to maintain rigidly monitored planning and
operational discipline, and can promptly modify plans and schedules should adverse economic, operational or
other issues arise
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Stakeholders
Employees
We aim to be a model employer, with high reputational and behavioural standards, safe operational working
conditions and clearly structured career opportunities and progression for employees
Government
We adopt and maintain best industry standards to fully exploit hydrocarbons resources for consumption within
Ukraine, and support the development of the oil and gas industry in Ukraine
Investors
We maintain disciplined operational and financial management to deliver strong growth, successful
development of reserves and profitable results
Local community
We embed corporate and social responsibility throughout our business activities, and contribute to and
participate in local community and countrywide social and welfare programmes, including material
humanitarian aid to provide support during the ongoing war in Ukraine
Suppliers
We maintain a clear and consistent approach to dealing with suppliers, ensuring adherence to contractual
obligations and maintaining safe working practices
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Our Strategic Priorities
Our three strategic priorities
1
Deliver profitable production and reserves growth in Ukraine, with continued capital efficient
operational excellence
Key targets:
Organic Growth
•
Expedite development of our assets, accelerate production growth, and exploit our resource base
•
Careful field and reserves development planning
•
Geological modelling to achieve high probability of success
Growth of reserves and resources
•
Additional exploration, life cycle mix, new business opportunities and screening process
Improving performance
•
Adopt oil and gas industry best practices
•
Reduce costs of operations
•
Application of drilling model
Key risks:
•
Reservoir and operational performance
•
Regional stability and conflict
•
Commodity price shifts
2
Be a responsible steward of the resources we manage, produce and deliver to market
Key targets:
Operating safely and responsibly
•
Continual assessment and monitoring of a safe operating environment during the ongoing war in
Ukraine
•
Adopt and exceed industry standards
•
Embed corporate and social responsibility processes throughout the business organisation
Strong and stable governance
•
Adhere to the QCA Code and institutional shareholder body guidance
Rigid operational financial and risk planning
•
Ensure that future operations and sales reflect the market and forecasts
•
Be cognisant of the necessity for good reservoir and corporate resource management
Key risks:
•
Implementation and adherence to QHSE policies
•
Maintenance of independence of the Board of Directors
•
Maintenance of controls and processes for financial and risk management
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
3
Recruit and retain a management team capable of delivering consistent top quartile
performance across recognised industry and market metrics
Key targets:
Stakeholder buy-in
•
Team clear on behaviours, roles and responsibilities
Retention
•
Keeping great people on the team
Correct skills for the objective/role
•
Clarity of skills required for each position
Attracting new talent
•
Strong reputation as a model employer
•
Transparent and clearly structured career opportunities, progression and talent nurturing
Key risks:
•
Failure to challenge and motivate existing employees
•
Compensation
•
Competitiveness
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Overview of Assets
Our assets comprise four fields in the Dnieper-Donets basin in north-eastern Ukraine. Our fields have high
potential for growth and longevity for future production - a strong foundation for success.
MEX-GOL and SV fields
The MEX-GOL and SV fields are held under two adjacent production licences, but are operated as one
integrated asset, and have significant gas and condensate reserves and potential resources of unconventional
gas.
Production Licences
We hold a 100% working interest in, and are the operator of, the MEX-GOL and SV fields. The production
licences for the fields were granted to the Group in July 2004 with an initial duration of 20 years, and the
duration of these licences have been extended to 2044 in order to fully develop the remaining reserves. The
economic life of these fields extend to 2038 and 2042 respectively pursuant to the most recent reserves and
resources assessment by DeGolyer and MacNaughton (“D&M”) as at 31 December 2017.
The two licences, located in Ukraine’s Poltava region, are adjacent and extend over a combined area of 253
km², approximately 200 km east of Kyiv.
Geology
Geologically, the fields are located towards the middle of the Dnieper-Donets sedimentary basin which extends
across the major part of north-eastern Ukraine. The vast majority of Ukrainian gas and condensate production
comes from this basin. The reservoirs comprise a series of gently dipping Carboniferous sandstones of Visean
age inter-bedded with shales at around 4,700 metres below the surface, with a gross thickness of between
800 and 1,000 metres.
Analysis suggests that the origin of these deposits ranges from fluvial to deltaic, and much of the trapping at
these fields is stratigraphic. Below these reservoirs is a thick sequence of shale above deeper, similar,
sandstones at a depth of around 5,800 metres. These sands are of Tournasian age and offer additional gas
potential. Deeper sandstones of Devonian age have also been penetrated in the fields.
Reserves
The development of the fields began in 1995 by the Ukrainian State company Chernihivnaftogasgeologiya
(“CNGG”), and shortly after this time, the Group entered a joint venture with CNGG in respect of the exploration
and development of these fields.
The fields have been mapped with 3D seismic, and a geological subsurface model has been developed and
refined using data derived from high-level reprocessing of such 3D seismic and new wells drilled on the fields.
The assessment undertaken by D&M as at 31 December 2017 estimated proved plus probable (2P) reserves
attributable to the fields of 50.0 MMboe, with 3C contingent resources of 25.3 MMboe.
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
VAS field
The VAS field is a smaller field with interesting potential. The field has assessed proved plus probable reserves
in excess of 3 MMboe and substantial contingent and prospective resources, as well as potential resources of
unconventional gas.
Production Licence
We hold a 100% working interest in, and are the operator of, the VAS field. The production licence for the field
was granted in August 2012 with a duration of 20 years. The economic life of the field extends to 2032 pursuant
to the most recent reserves and resources assessment by D&M as at 31 December 2018.
The licence extends over an area of 33.2 km² and is located 17 km south-east of Kharkiv, in the Kharkiv region
of Ukraine. The field was discovered in 1981, and the first well on the licence area was drilled in 2004.
Geology
Geologically, the field is located towards the middle of the Dnieper-Donets sedimentary basin in north-east
Ukraine. The field is trapped in an anticlinal structure broken into several faulted blocks, which are gently
dipping to the north, stretching from the north-east to south-west along a main bounding fault. The gas is
located in Carboniferous sandstones of Bashkirian, Serpukhovian and Visean age.
The productive reservoirs are at depths between 3,370 and 3,700 metres.
Reserves
The field has been mapped with 3D seismic, and a geological subsurface model has been developed and
refined using data derived from such 3D seismic and new wells drilled on the field.
The assessment undertaken by D&M as at 31 December 2018 estimated proved plus probable (2P) reserves
of 3.1 MMboe, with 3C contingent resources of 0.6 MMboe, and prospective resources of 7.7 MMboe in the
VED area of the field. The next well planned on the field is designed to explore the VED area of the field.
17
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
SC Licence
The SC licence area is located near to and has similar characteristics to the SV field, and is prospective for
gas and condensate.
Exploration Licence
We hold a 100% working interest in, and are the operator of, the SC licence. The licence was granted in May
2017 with a duration of 20 years.
The licence extends over an area of 97 km2, and is located in the Poltava region in north-eastern Ukraine,
approximately 15 km east of the SV field.
Geology
Geologically, the field is located towards the middle of the Dnieper-Donets sedimentary basin which extends
across the major part of north-eastern Ukraine. The vast majority of Ukrainian gas and condensate production
comes from this basin. The reservoirs comprise a series of gently dipping Carboniferous sandstones of Visean
age inter-bedded with shales at depth between 4,600 and 6,000 metres.
Resources
The licence is prospective for gas and condensate, and has been the subject of exploration since the 1980s,
with five wells having been drilled on the licence since then, although none of these wells are currently on
production.
The assessment undertaken by D&M as at 1 January 2021 estimated proved plus probable (2P) reserves of
12.1 MMboe, with 3C contingent resources of 15.0 MMboe.
18
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Overview of Reserves
1.
MEX-GOL and SV fields
The Group’s estimates of the remaining Reserves and Resources at the MEX-GOL and SV fields are derived
from an assessment undertaken by D&M, as at 31 December 2017 (the “MEX-GOL-SV Report”), which was
announced on 31 July 2018. During the period from 1 January 2018 to 31 December 2024, the Group has
produced 7.69 MMboe from these fields.
The MEX-GOL-SV Report estimated the remaining Reserves as at 31 December 2017 in the MEX-GOL and
SV fields as follows:
Proved
(1P)
Proved + Probable
(2P)
Proved + Probable +
Possible (3P)
Gas
121.9 Bscf / 3.5 Bm3
218.3 Bscf / 6.2 Bm3
256.5 Bscf / 7.3 Bm3
Condensate
4.3 MMbbl / 514 Mtonne
7.9 MMbbl / 943 Mtonne
9.2 MMbbl / 1,098
Mtonne
LPG
2.8 MMbbl / 233 Mtonne
5.0 MMbbl / 418 Mtonne
5.8 MMbbl / 491 Mtonne
Total
27.8 MMboe
50.0 MMboe
58.6 MMboe
The MEX-GOL-SV Report estimated the Contingent Resources as at 31 December 2017 in the MEX-GOL and
SV fields as follows:
Contingent Resources
(1C)
Contingent Resources
(2C)
Contingent Resources
(3C)
Gas
14.7 Bscf / 0.42 Bm3
38.3 Bscf / 1.08 Bm3
105.9 Bscf / 3.00 Bm3
Condensate
1.17 MMbbl / 144 Mtonne
2.8 MMbbl / 343 Mtonne
6.6 MMbbl / 812 Mtonne
Total
3.8 MMboe
9.6 MMboe
25.3 MMboe
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
2.
VAS field
The Group’s estimates of the remaining Reserves and Resources at the VAS field and the Prospective
Resources at the VED prospect are derived from an assessment undertaken by D&M as at 31 December 2018
(the “VAS Report”), which was announced on 21 August 2019. During the period from 1 January 2019 to 31
December 2024, 0.82 MMboe were produced from the field.
The VAS Report estimated the remaining Reserves as at 31 December 2018 in the VAS field as follows:
Proved
(1P)
Proved + Probable
(2P)
Proved + Probable +
Possible (3P)
Gas
9,114 MMscf / 258 MMm3
15,098 MMscf / 427
MMm3
18,816 MMscf / 533
MMm3
Condensate
205 Mbbl / 25 Mtonne
346 Mbbl / 42 Mtonne
401 Mbbl / 48 Mtonne
Total
1.895 MMboe
3.145 MMboe
3.890 MMboe
The VAS Report estimated the Contingent Resources as at 31 December 2018 in the VAS field as follows:
Contingent Resources
(1C)
Contingent Resources
(2C)
Contingent Resources
(3C)
Gas
-
-
2,912 MMscf / 83 MMm3
Condensate
-
-
74 Mbbl / 9 Mtonne
The VAS Report estimated the Prospective Resources as at 31 December 2018 in the VED prospect as
follows:
Low (1U)
Best (2U)
High (3U)
Mean
Gas
23,721 MMscf /
672 MMm3
38,079 MMscf /
1,078 MMm3
62,293 MMscf /
1,764 MMm3
41,291 MMscf /
1,169 MMm3
20
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
3.
SC Licence
The Group’s estimates of the remaining Reserves and Contingent Resources at the SC Licence are derived
from an assessment undertaken by D&M as at 1 January 2021 (the “SC Report”), which was announced on 2
June 2021.
The SC Report estimated the remaining Reserves as at 1 January 2021 in the SC licence area as follows:
Proved
(1P)
Proved + Probable
(2P)
Proved + Probable +
Possible (3P)
Gas
17.20 Bscf / 0.49 Bm3
65.16 Bscf / 1.85 Bm3
85.03 Bscf / 2.41 Bm3
Condensate
145 Mbbl / 16 Mtonne
548 Mbbl / 61 Mtonne
716 Mbbl / 80 Mtonne
Total
3.2 MMboe
12.1 MMboe
15.7 MMboe
The SC Report estimated the Contingent Resources as at 1 January 2021 in the SC licence area as follows:
Contingent Resources
(1C)
Contingent Resources
(2C)
Contingent Resources
(3C)
Gas
8.56 Bscf / 0.24 Bm3
14.18 Bscf / 0.40 Bm3
81.16 Bscf / 2.30 Bm3
Condensate
72 Mbbl / 8 Mtonne
119 Mbbl / 13 Mtonne
682 Mbbl / 75 Mtonne
Total
1.6 MMboe
2.6 MMboe
15.0 MMboe
21
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Finance Review
Despite the continued significant disruption caused by the war in Ukraine and the periods of suspension of its
production licences, the Group was still able to generate a net profit for the period of $23.7 million, down 10%
on last year (2023: $26.5 million) due to lower production rates and, more materially, much lower gas prices.
Revenue for the year, derived from the sale of the Group’s Ukrainian gas, condensate, oil and LPG production,
was down 28% at $44.9 million (2023: $62.2 million), primarily as a result of the combined effects of lower
production rates and a decrease in gas and LPG prices in the period, slightly mitigated by an improvement in
condensate prices.
Aggregate average daily production for the year was down approximately 14% at 2,288 boepd (2023: 2,644
boepd), in each case calculated on the days when the Group’s fields were actually in production, due to the
disruption to operations as a result of the war in Ukraine, natural field decline and the suspensions of the VAS
licence until June 2024 and the MEX-GOL, SV and VAS licences in November 2024. Aggregate production
volumes for the year were 722,753 boe, which is lower than the aggregate production volumes of 885,610 boe
in 2023 for the same reasons.
During the year, while there was less volatility in global, and particularly European, gas prices, the war in
Ukraine continued to disrupt the Ukrainian gas market, with a resultant decrease in realised gas sales prices,
causing a 19% decline in average gas price realisations in the period at $318/Mm3 (UAH12,767/Mm3). Average
sales prices for LPG also declined by 6% at $92/boe, while average sales prices for condensate improved by
42% at $101/bbl, and, following the successful workover of the MEX-102 well, oil production commenced
during October 2024 with average realised oil prices of $69/bbl (2023: $394/Mm3 (UAH14,426/Mm3), $71/bbl
and $98/boe respectively).
During the period from 1 January 2025 to 28 February 2025, the average realised gas, condensate and oil
prices were $377/Mm3 (UAH15,836/Mm3), $63/bbl and $64/bbl respectively. There were no LPG sales in this
period due to a delay in the renewal of the Group’s LPG production licence. Since 1 March 2025, there have
been no hydrocarbon sales as a result of the suspension of the MEX-GOL, SV and VAS production licences.
Gross profit for the year was also lower at $28.2 million (2023: $39.0 million) due to the lower gas prices as
well as the lower production rates. Cash generated from operations was also much lower at $33.0 million
(2023: $62.9 million) for similar reasons.
Cost of sales for the year was also proportionately lower at $16.7 million (2023: $23.2 million). The decline in
production resulted in a decline in depreciation, and the lower gas prices also reduced the revenue-related
costs of taxes and well rental.
The subsoil tax rates applicable to gas production were stable during the year as follows:
(i)
when gas prices are up to $150/Mm3, the rate for wells drilled prior to 1 January 2018 (“old wells”) is
14.5% for gas produced from deposits at depths shallower than 5,000 metres and 7% for gas produced
from deposits deeper than 5,000 metres, and for wells drilled after 1 January 2018 (“new wells”) is 6%
for gas produced from deposits at depths shallower than 5,000 metres and 3% for gas produced from
deposits deeper than 5,000 metres;
(ii)
when gas prices are between $150/Mm3 and $400/Mm3, the rate for old wells is 29% for gas produced
from deposits at depths shallower than 5,000 metres and 14% for gas produced from deposits deeper
than 5,000 metres, and for new wells is 12% for gas produced from deposits at depths shallower than
5,000 metres and 6% for gas produced from deposits deeper than 5,000 metres;
(iii)
when gas prices are more than $400/Mm3, for the first $400/Mm3, the rate for old wells is 29% for gas
produced from deposits at depths shallower than 5,000 metres and 14% for gas produced from
deposits deeper than 5,000 metres, and for new wells is 12% for gas produced from deposits at depths
shallower than 5,000 metres and 6% for gas produced from deposits deeper than 5,000 metres, and
for the difference between $400/Mm3 and the actual price, the rate for old wells is 65% for gas
22
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
produced from deposits at depths shallower than 5,000 metres and 31% for gas produced from
deposits deeper than 5,000 metres, and for new wells is 36% for gas produced from deposits at depths
shallower than 5,000 metres and 18% for gas produced from deposits deeper than 5,000 metres.
The subsoil tax rates applicable to condensate and oil production were 31% for condensate and oil produced
from deposits shallower than 5,000 metres and 16% for condensate and oil produced from deposits deeper
than 5,000 metres, for both old and new wells.
As a direct result of the war in Ukraine, including the significant decline in domestic consumption disrupting
the previous supply, demand and pricing dynamics, there was a divergence between domestic and European
gas pricing, and accordingly, the methodology (linked to European prices) used to determine the reference
gas price for the subsoil tax rates had a significantly detrimental effect for domestic gas producers. In order to
address this issue, legislation was implemented in August 2022 which modified such methodology to ensure
that it operates as originally intended (with such reference price being aligned with domestic prices).
Administrative expenses for the year were lower at $6.2 million (2023: $6.9 million) as a result of cost cutting
measures implemented during the year, as well as the reduced level of activity.
The tax charge for the year was lower at $6.7 million (2023: $8.7 million), and comprised a current tax charge
of $5.5 million (2023: $6.8 million) and a deferred tax charge of $1.2 million (2023: $1.9 million).
A deferred tax asset relating to the Group’s provision for decommissioning as at 31 December 2024 of $0.6
million (2023: $0.6 million) was recognised on the tax effect of the temporary differences of the Group’s
provision for decommissioning at the MEX-GOL and SV fields, and its tax base. A deferred tax liability relating
to the Group’s development and production assets at the MEX-GOL and SV fields as at 31 December 2024 of
$6.4 million (2023: $5.5 million) was recognised on the tax effect of the temporary differences between the
carrying value of the Group’s development and production asset at the MEX-GOL and SV fields, and its tax
base.
A deferred tax asset relating to the Group’s provision for decommissioning as at 31 December 2024 of $0.4
million (2023: $0.3 million) was recognised on the tax effect of the temporary differences on the Group’s
provision on decommissioning at the VAS field, and its tax base. A deferred tax asset relating to the Group’s
development and production assets at the VAS field as at 31 December 2024 of $0.1 million (2023: deferred
tax liability of $0.1 million) was recognised on the tax effect of the temporary differences between the carrying
value of the Group’s development and production asset at the VAS field, and its tax base.
Capital investment of $3.2 million reflects the investment in the Group’s oil and gas development and
production assets during the year (2023: $13.5 million). The low level of capital investment in the year is a
function of the deferral of certain aspects of the Group’s development plans necessitated by the ongoing war
in Ukraine and the suspensions of the VAS and SC licences until June 2024, and of the MEX-GOL, SV and
VAS licences since November 2024.
A review of any indicators of impairment of the carrying value of the Group’s assets was undertaken at the
year end and this review did conclude that the war in Ukraine and the suspensions of the MEX-GOL, SV and
VAS production licences had resulted in such an indicator. Impairment reviews were therefore conducted on
the carrying value of the Group’s assets but did not result in the recognition of any further impairment loss
(2023: $nil).
Cash and cash equivalents held as at 31 December 2024 were higher at $99.4 million (2023: $76.5 million).
The Group’s cash and cash equivalents balance as at 2 June 2025 was $102.1 million, held as to $85.1 million
equivalent in Ukrainian Hryvnia and the balance of $17.0 million equivalent predominantly in US Dollars, Euros
and Pounds Sterling.
During 2024, the Ukrainian Hryvnia weakened against the US Dollar, at UAH38.0/$1.00 on 31 December 2023
and UAH42.0/$1.00 on 31 December 2024. The impact of this was $14.5 million of foreign exchange loss
(2023: $4.8 million of foreign exchange loss). Increases and decreases in the value of the Ukrainian Hryvnia
23
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
against the US Dollar affect the carrying value of the Group’s assets. The official exchange rate of the Ukrainian
Hryvnia to the US Dollar on 2 June 2025 was UAH41.5/$1.00.
Cash from operations has funded the capital investment during the year, and the Group’s current cash position
and positive operating cash flow are the sources from which the Group plans to fund the development
programmes for its assets over the remainder of 2025 and beyond. This is coupled with the fact that the Group
is currently debt-free, and therefore has no debt covenants that may otherwise impede its ability to implement
contingency plans if domestic and/or global circumstances dictate. This flexibility and ability to monitor and
manage development plans and liquidity is a cornerstone of our planning, and underpins our assessments of
the future. The annual running costs of less than $8 million are currently covered by interest income from the
Group’s monetary resources at the end of the year of $99.4 million, meaning that the Group remains in a very
strong financial position, notwithstanding the impact of the current war in Ukraine, as well as any local or global
shocks that may occur to the industry and/or the Group.
Bruce Burrows
Finance Director
24
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Key Performance Indicators
The Group uses key performance indicators (KPIs) to measure its performance and achievements in its
business activities. The KPIs are reviewed annually to ensure that the KPIs are relevant. The Group’s targeted
and achieved results of its KPIs for 2024 are set out below. The war in Ukraine had a material and ongoing
impact on all operational and financial targets, and had a significant impact on the actual outcome for the year
and therefore performance against target. The Level One KPI is an overriding KPI for performance related
remuneration, and must be achieved to invoke the Level Two KPIs.
Level One KPI
1.
Fatalities of zero
•
Target -
zero
•
Actual -
zero
Level Two KPIs
1.
Total volumes of gas and condensate produced
•
Target -
608,809 boe
•
Actual -
706,138 boe
2.
Lost Time Incidents
•
Target -
zero
•
Actual -
zero
3.
Operating expenditure per barrel of oil equivalent
•
Target -
UAH762 ($18.8)
•
Actual -
UAH704 ($17.0)
4.
Cashflow from operating activities
•
Target -
UAH886.7 million ($21.9 million)
•
Actual -
UAH1,063 million ($25.7 million)
25
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Sustainability
We strive to operate and develop our business in a sustainable way and believe in operating to top quartile
ethical, safety and environmental standards. We intend to make a positive impact wherever we work.
Transparency and fairness
We succeed in business by working in an honest and ethical way, and we will not countenance bribery and
corruption. Our Anti-Bribery and Corruption Policy explains our approach to these issues. It is also important
that all our stakeholders are well informed about our work, and that we carry out tenders for operational
services and equipment in a fair and transparent way.
Our people
Our people are our most valuable asset. We work hard to develop the talents and skills of our team, and we
endeavour to recruit outstanding new employees to enrich our capabilities. At the same time, we place
paramount emphasis on safety at work, as well as the broader health and safety of our employees, and have
and continue to implement rigorous new processes and training across the business.
Environmental protection
We regularly update and modernise our infrastructure and ways of working to improve efficiency and reduce
our impact on the natural world. Independent environmental research companies monitor the environment in
the areas in which we operate to ensure that we meet the relevant standards and regulations.
Local communities
We work hard to give back to the communities where we work, not just by creating jobs and paying taxes, but
by maintaining and contributing to local organisations and infrastructure. Among other things, we have
supported local schools (e.g. materials for repair works and funding of school meals) and youth sports, as well
as the repair of roads and local infrastructure, although the war has curtailed many of these initiatives in recent
times.
Humanitarian aid
Since the commencement of the war, we have contributed to humanitarian aid initiatives in Ukraine, including
contributing to the provision of medical equipment and supplies and other humanitarian aid.
Environmental Management
Protecting the natural environment has always been a key focus for us but arguably has never been more
important than now. We carefully monitor the effects of our operations, regularly upgrade equipment to
minimise our impact, and have implemented strict quality, health, safety and environmental policies. Our QHSE
policies and performance are overseen by our Health, Safety and Environment Committee.
We work to mitigate our environmental impact in many ways, including taking a responsible attitude to methods
of production, carefully coordinating our activities, using only high-quality materials certified to international
standards, and frequently updating our technology and processes.
We have been accredited to environmental standard ISO 14001:2015 Environmental Management Systems,
and our QHSE policies are designed to raise standards in these areas.
Regular monitoring of environmental indicators for ongoing projects ensures we can continually assess our
impact on the environment.
26
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Modernised infrastructure
We continue to modernise our production infrastructure in order to improve both operational and environmental
performance.
Over recent years we have progressively upgraded infrastructure, including the metering and separation
station (“MSS”) at the gas processing facility at the MEX-GOL and SV fields. This involved the replacement of
equipment and automation of various processes, allowing us to solve a number of issues and reduce our
environmental impact through, in particular:
•
significant reduction of gas flaring, gas losses and air emissions
•
expansion of pollution controls in and around the area
•
development of an enclosed gas measuring system on a well
•
stricter observance of environmental laws and safety regulations
We also installed a new condensate stabilisation unit (“CSU”) at the MSS, enabling us to use raw materials
more efficiently and greatly improve the MSS’s environmental performance. We also installed facilities to
produce LPG at the MEX-GOL and SV fields. The LPG produced is not only a very marketable product
(liquefied propane-butane) but is also a relatively environmentally friendly hydrocarbon fuel.
We have undertaken work on the gas processing facilities at the MEX-GOL and SV fields to upgrade the LPG
extraction circuit, increase the flow capacity of the facilities, and significantly increase the liquids tank storage
capacity, all of which are designed to improve overall plant efficiencies, improve the quality of liquids produced
and boost recoveries of LPG, while reducing environmental emissions.
Our QHSE policies
Our policies for quality, health, safety and environment protection focus on the following:
•
using our capabilities in the most efficient ways possible
•
protecting and improving environmental conditions where we work
•
improving occupational health and safety
•
developing and expanding employees’ skills
Environmental monitoring
From time to time, we commission independent environmental research companies to monitor the state of soil,
underground and open water, and plant and animal life throughout the entire area of our activities. These
studies have never detected any violation of relevant environmental standards.
Streamlined Energy and Carbon Reporting (“SECR”)
We remain very aware of the current drive globally to monitor, reduce and report levels of energy use in
delivering Group performance, and note that SECR reporting requirements apply to the Group. However, as
our United Kingdom emissions are de-minimis, with only two full-time employees in the United Kingdom and
no operational presence, we fall below the minimum threshold and are currently exempt from reporting such
information. Notwithstanding that exemption, but subject to the restrictions caused by the war in Ukraine, we
are endeavouring to review our Ukrainian operations to determine the processes of self-reporting for our global
operations, and formulating the content of our intended self-reporting.
This initiative is intended to:
•
disclose the environmental-related data currently collected, including: energy consumed, water
consumed, greenhouse gas emissions and waste generated (in natural units and relative to volumes
of extracted gas);
•
determine any additional applicable indicators to be added, for example: natural gas and solid fuel
consumed for heating, compressors and other equipment; diesel fuel used in diesel generators;
consumption of petrol and diesel in vehicles, etc.;
•
determine potential benchmarks; and
•
determine the reporting frequency.
27
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Health and Safety
Safety at work is fundamental and underpins all our success. We continue to improve our safety standards by
introducing new processes and systems. We have introduced new production processes which are intended
to meet or exceed all applicable health and safety standards in Ukraine, as well as aiming to be more efficient
than previously.
We operate a Near Miss reporting system, designed to increase occupational health and safety by detecting
and eliminating dangerous incidents, situations, and practices (“Near Misses”). We centrally record all Near
Misses in our workplaces and seek to establish ways to reduce or eliminate the chances of dangerous incidents
occurring in the future. We undertake practical training sessions and generate a register of reported Near
Misses, ranked by risk level (identification, recognition and mitigation as a key to safe working). We have
developed our Near Miss reporting system to be a fully electronic process, carrying out Near Miss training for
internal auditors and coaches, rolling out new ways to detect and eliminate Near Misses, and introducing Near
Miss KPIs for our team.
In 2020, we launched our TOP 10 safety standards for high risk operations, with leadership and training
programmes for each of these standards.
In 2021, we continued to develop our health and safety regime, with the implementation of a number of
improvement measures, digitisation of health and safety procedures, the adoption of specific measures for the
protection of employees against COVID-19, and an extensive occupational health and safety training
programme for all employees. In addition, our operations were re-certified as complying with international
standards of quality, occupational safety and health management systems, according to ISO 14001:2015 and
ISO 45001:2018.
In early 2022, in anticipation of possible military conflict between Russia and Ukraine, a crisis management
committee was established to prepare for such a conflict, including developing emergency and contingency
plans in case of war and undertaking safety and evacuation drills at operational sites. This proved crucial
immediately following the invasion of Ukraine by Russia, facilitating the prompt and safe evacuation of
personnel, who were then able to work remotely, as well as the evacuation of their families to the west of
Ukraine. Surface and underground bomb shelters were constructed at all operational sites during 2022.
Information and instruction materials have been developed and training has been conducted for all personnel,
including safety actions in case of shelling or chemical or radiation contamination; mental health aid; and
enhanced practical training on first aid and medical assistance.
The safe implementation and undertaking of technical work also remains a priority, and all scheduled training
was conducted as planned during 2024, including safe lifting operations, gas work safety, fire safety and safe
driving. All operational sites maintain incident reporting transparency, and if incidents occurred, or were
identified, appropriate corrective actions were undertaken. Despite the war, the Group operated within
applicable legal, health, safety and environmental frameworks and, despite the imposition of martial law,
successfully obtained all necessary approvals from environmental and labour inspection authorities.
The preservation of human life and health is our highest value, and we will continue to work hard to further
raise occupational health and safety standards.
War in Ukraine
The invasion of Ukraine by Russia which commenced on 24 February 2022 has caused a catastrophic
humanitarian situation in Ukraine, as well as extreme challenges to the social, fiscal, economic and business
environment. At the present time, the scope and duration of the war is unknown and there is a great deal of
uncertainty about the ultimate impact that such war will have on Ukraine and its population.
28
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
These circumstances mean that it is extremely difficult to plan future investment and operational activities at
the Group’s fields. The Group is taking all possible measures to safeguard its staff, especially those who are
located at the Group’s fields. Where possible, staff work remotely and have been supplied with all necessary
devices and software to facilitate remote working, and only necessary field staff attend field operational
facilities and locations, where all possible measures are maintained to minimise risk, such as ensuring that
hydrocarbon inventories are kept at minimum levels. However, when undertaking field operations, the Group
is taking, and will take, all measures available to protect and safeguard its personnel and business, with the
safety and wellbeing of its staff and contractors being paramount.
29
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Principal Risks and Uncertainties
Risks Overview
Managing risks effectively is fundamental to the success of our business and we apply rigorous criteria across
our operations and functions. We also operate to top quartile quality, health, safety and environmental
(“QHSE”) standards, and we monitor and manage each of these areas.
We evaluate the risks according to a common set of assessment criteria deployed across business units,
corporate functions and capital investment projects, and then rank and prioritise risks by importance and by
comparing their level against predetermined target risk levels and tolerance thresholds.
For all major risks we have developed a strategy for how we respond and mitigation plans, with deadlines and
responsibilities, so if a serious risk ever materialises, we know how we will react and will react quickly.
The key team responsible for managing risks is our Management Risk Committee. This Committee monitors
our business operations, identifies and records important risks, and formally reviews and updates our Risk
Register and Mitigation Plan each quarter.
In addition, oversight and responsibility of all QHSE matters falls to the HSE Committee composed of Board
members and senior management.
The Group’s QHSE policies are robustly enforced via management meetings, training and the work of our
safety experts. The overall aim is always to ensure that the impact of our work on our staff, contractors and
the environment is as low as is practically possible.
We also operate a Near Miss reporting system, collecting and addressing reports on near miss incidents to
monitor and improve occupational health and safety.
30
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Principal Risks and How We Manage Them
The Group has a risk evaluation methodology in place to assist in the review of the risks across all material
aspects of its business. This methodology highlights external, operational and technical, financial and
corporate risks and assesses the level of risk and potential consequences. It is periodically presented to the
Audit Committee and the Board for review, to bring to their attention potential risks and, where possible,
propose mitigating actions. Key risks recognised and mitigation factors are detailed below:-
Risk
Mitigation
External risks
War in Ukraine
On 24 February 2022, Russia invaded Ukraine and
there is currently a serious and ongoing war within
Ukraine. This war is having a huge impact on Ukraine
and its population, with significant destruction of
infrastructure and buildings in the areas of conflict, as
well as damage in other areas of Ukraine. The war is
resulting in significant casualties and has caused a
huge humanitarian catastrophe and refugee influx into
neighbouring countries. The war is also impacting the
fiscal and economic environment in Ukraine, as well
as the financial stability and banking system in
Ukraine, including restrictions on the transfer of funds
outside Ukraine. The war is an escalation of the
previous regional conflict risk faced by the business, a
dispute that has been going on since 2014 in parts of
eastern Ukraine, and since that time Russia has
continued to occupy Crimea. The current war is also
having a significant adverse effect on the Ukrainian
financial markets, hampering the ability of Ukrainian
companies and banks to obtain funding from the
international capital and debt markets. The war has
disrupted the Group’s business and operations,
causing periods of suspension of field operations, and
has also impacted the supply of materials and
equipment and the availability of contractors to
undertake field operations. At present, the war is
ongoing and the scope and duration of the war is
uncertain.
The Group has assets in the areas of conflict in the east
of Ukraine, and the war has disrupted its operations in
those areas. The Group has been only undertaking
limited field and production operations at the MEX-GOL,
SV and VAS fields, as well as at the SC licence area,
until the suspension of the MEX-GOL, SV and VAS
production
licences in
November
2024. During
production operations at the fields, inventories of
hydrocarbons are maintained at minimum levels. At the
sites where operations are suspended, there are no staff
permanently on site, except for necessary security staff.
Where possible, all other staff work remotely and have
been supplied with all necessary devices and software
to facilitate remote working. Additionally, the Group aims
to maintain a significant proportion of its cash resources
outside Ukraine. The Group continues to monitor the
situation and endeavours to protect its assets and
safeguard its staff and contractors.
Risk relating to Ukraine
Ukraine is an emerging market and as such the Group
is exposed to greater regulatory, economic and
political risks than it would be in other jurisdictions.
Emerging economies are generally subject to a
volatile political and economic environment, which
makes
them
vulnerable
to
market
downturns
elsewhere in the world and could adversely impact the
Group’s ability to operate in the market. Furthermore,
the war in Ukraine is impacting the social, fiscal and
economic environment, the financial and banking
system, and the economic stability of Ukraine. As a
result, Ukraine will require financial assistance and/or
aid from international financial agencies to provide
economic support and assist with the reconstruction of
infrastructure and buildings damaged in the war.
The Group minimises this risk by continuously
monitoring the market in Ukraine and by maintaining as
strong a working relationship as possible with the
Ukrainian regulatory authorities. The Group also
maintains a significant proportion of its cash holdings in
international banks outside Ukraine.
31
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Banking system in Ukraine
The banking system in Ukraine has been under great
strain in recent years due to the weak level of capital,
low asset quality caused by the economic situation,
currency depreciation, changing regulations and other
economic pressures generally, and so the risks
associated with the banks in Ukraine have been
significant, including in relation to the banks with which
the Group has operated bank accounts. This situation
was improving moderately following remedial action
by the National Bank of Ukraine, but the current war
has significantly affected such improvements, and the
National Bank of Ukraine has imposed a number of
restrictive measures designed to protect the banking
system, including restrictions on the transfer of funds
outside Ukraine (albeit that the Group aims to maintain
a significant proportion of its cash resources outside
Ukraine). In addition, Ukraine continues to be
supported by funding from the International Monetary
Fund.
The creditworthiness and potential risks relating to the
banks in Ukraine are regularly reviewed by the Group,
but the geopolitical and economic events in Ukraine
over recent years have significantly weakened the
Ukrainian banking sector. This has been exacerbated by
the current war in Ukraine. In light of this, the Group has
taken and continues to take steps to diversify its banking
arrangements between a number of banks in Ukraine.
These measures are designed to spread the risks
associated with each bank’s creditworthiness, and the
Group endeavours to use banks that have the best
available creditworthiness. Nevertheless, and despite
the recent improvements, the Ukrainian banking sector
remains weakly capitalised and so the risks associated
with the banks in Ukraine remain significant, including in
relation to the banks with which the Group operates
bank accounts. As a consequence, the Group also
maintains a significant proportion of its cash holdings in
international banks outside Ukraine.
Geopolitical environment in Ukraine
Although there were some improvements in recent
years, there has not been a final resolution of the
political, fiscal and economic situation in Ukraine, and
the current war has had a severe detrimental effect on
the economic situation in Ukraine. The ongoing effects
of this are difficult to predict and likely to continue to
affect the Ukrainian economy and potentially the
Group’s business. This situation is currently affecting
the Group’s production and field operations, and the
ongoing
instability
is
disrupting
the
Group’s
development and operational planning for its assets.
The Group continually monitors the market and
business environment in Ukraine and endeavours to
recognise approaching risks and factors that may affect
its business. However, the war in Ukraine creates
material challenges in planning future investment and
operations. The Group is limiting its operational
activities to minimise risk to its staff and contractors, and
to limit its financial exposure.
Climate change
Any near and medium-term continued warming of the
planet can have potentially increasing negative social,
economic
and
environmental
consequences,
generally, globally and regionally, and specifically in
relation to the Group. The potential impacts include:
loss of market; and increased costs of operations
through increasing regulatory oversight and controls,
including potential effective or actual loss of licences
to operate. As a diligent operator aware of and
responsive to its good stewardship responsibilities,
the Group not only needs to monitor and modify its
business plans and operations to react to changes, but
also to ensure its environmental footprint is as minimal
as it can practicably be in managing the hydrocarbon
resources the Group produces.
The Group’s plans include: assessing, reducing and/or
mitigating its emissions from its operations; and
identifying climate change-related risks and assessing
the degree to which they can affect its business,
including financial implications. The HSE Committee is
specifically
tasked
with
overseeing,
measuring,
benchmarking and mitigating the Group’s environmental
and climate impact, which will be reported on in future
periods. At this stage, the Group does not consider
climate change to have any material implications on the
Group’s financial statements, including accounting
estimates.
Operational and technical risks
Quality, Health, Safety and Environment (“QHSE”)
The oil and gas industry, by its nature, conducts
activities
which
can
cause
health,
safety,
environmental
and
security
incidents.
Serious
incidents can not only have a financial impact but can
also damage the Group’s reputation and the
opportunity to undertake further projects. The war in
Ukraine poses significant risks to field operations, by
The Group maintains QHSE policies and requires that
management, staff and contractors adhere to these
policies. The policies ensure that the Group meets
Ukrainian legislative standards in full and achieves
international standards to the maximum extent possible.
As a consequence of the current war in Ukraine and the
periods of suspension of the Group’s production
32
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
way of potential threat to the lives of employees and
contractors,
and
damage
to
equipment
and
infrastructure.
licences, only limited field and production operations
have been undertaken at the Group’s fields. Only
essential staff are located at site, and all other staff are
working remotely, either from areas away from the
conflict areas or outside Ukraine. The Group has
invested in technology that allows many staff to work
just as effectively from remote locations.
Industry risks
The Group is exposed to risks which are generally
associated with the oil and gas industry. For example,
the Group’s ability to pursue and develop its projects
and undertake development programmes depends on
a number of uncertainties, including the availability of
capital, seasonal conditions, regulatory approvals,
gas, condensate, oil and LPG prices, development
costs and drilling success. As a result of these
uncertainties, it is unknown whether potential drilling
locations identified on proposed projects will ever be
drilled or whether these or any other potential drilling
locations will be able to produce gas, condensate or
oil. In addition, drilling activities are subject to many
risks, including the risk that commercially productive
reservoirs will not be discovered. Drilling for
hydrocarbons can be unprofitable, not only due to dry
holes, but also as a result of productive wells that do
not produce sufficiently to be economic. In addition,
drilling and production operations are highly technical
and complex activities and may be curtailed, delayed
or cancelled as a result of a variety of factors.
The Group has well qualified and experienced technical
management staff to plan and supervise operational
activities. In addition, the Group engages with suitably
qualified local and international geological, geophysical
and engineering experts and contractors to supplement
and broaden the pool of expertise available to the
Group. Detailed planning of development activities is
undertaken with the aim of managing the inherent risks
associated with oil and gas exploration and production,
as well as ensuring that appropriate equipment and
personnel are available for the operations, and that local
contractors are appropriately supervised.
Production of hydrocarbons
Producing gas, condensate and oil reservoirs are
generally characterised by declining production rates
which vary depending upon reservoir characteristics
and other factors. Future production of the Group’s
gas, condensate and oil reserves, and therefore the
Group’s cash flow and income, are highly dependent
on the Group’s success in operating existing
producing wells, drilling new production wells and
efficiently developing and exploiting any reserves, and
finding or acquiring additional reserves. The Group
may not be able to develop, find or acquire reserves
at acceptable costs. The experience gained from
drilling undertaken to date highlights such risks as the
Group targets the appraisal and production of these
hydrocarbons.
In recent years, the Group has engaged external
technical consultants to undertake a comprehensive
review and re-evaluation study of the MEX-GOL and SV
fields in order to gain an improved understanding of the
geological
aspects of the fields and
reservoir
engineering, drilling and completion techniques, and the
results of this study and further planned technical work
are being used by the Group in the future development
of these fields. The Group has established an ongoing
relationship with such external technical consultants to
ensure that technical management and planning is of a
high quality in respect of all development activities on
the Group’s fields.
Risks relating to the further development and
operation of the Group’s gas, condensate and oil
fields in Ukraine
The planned development and operation of the
Group’s gas, condensate and oil fields in Ukraine is
susceptible to appraisal, development and operational
risk. This could include, but is not restricted to, delays
in the delivery of equipment in Ukraine, failure of key
equipment, lower than expected production from wells
that are currently producing, or new wells that are
brought on-stream, problematic wells and complex
geology which is difficult to drill or interpret. The
The
Group’s
technical
management
staff,
in
consultation with its external technical consultants,
carefully
plan
and
supervise
development
and
operational activities with the aim of managing the risks
associated with the further development of the Group’s
fields in Ukraine. This includes detailed review and
consideration of available subsurface data, utilisation of
modern
geological
software,
and
utilisation
of
engineering and completion techniques developed for
33
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
generation
of
significant
operational
cash
is
dependent on the successful delivery and completion
of the development and operation of the fields. The
war
in
Ukraine
is
impacting
planning
and
implementation of development and operations at the
Group’s fields.
the fields. With regards to operational activities, the
Group ensures that appropriate equipment and
personnel are available for the operations, and that
operational contractors are appropriately supervised. In
addition, the Group performs a review of indicators of
impairment of its oil and gas assets on an annual basis,
and considers whether an assessment of its oil and gas
assets by a suitably qualified independent assessor is
appropriate or required.
Drilling and workover operations
Due to the depth and nature of the reservoirs in the
Group’s fields, the technical difficulty of drilling or re-
entering wells in the Group’s fields is high, and this
and the equipment limitations within Ukraine, can
result in unsuccessful or lower than expected
outcomes for wells.
The utilisation of detailed sub-surface analysis, careful
well planning and engineering design in designing work
programmes, along with appropriate procurement
procedures and competent on-site management, aims
to minimise these risks.
Maintenance of facilities
There is a risk that production or transportation
facilities can fail due to inadequate maintenance,
control or poor performance of the Group’s suppliers.
The Group’s facilities are operated and maintained at
standards above the Ukrainian minimum requirements.
Operations
staff
are
experienced
and
receive
supplemental training to ensure that facilities are
properly operated and maintained. Service providers
are rigorously reviewed at the tender stage and are
monitored during the contract period.
Financial risks
Exposure to cash flow and liquidity risk
There is a risk that insufficient funds are available to
meet the Group’s development obligations to
commercialise the Group’s oil and gas assets. Since
a
significant
proportion
of
the
future
capital
requirements of the Group is expected to be derived
from operational cash generated from production,
including from wells yet to be drilled, there is a risk that
in the longer term insufficient operational cash is
generated, or that additional funding, should the need
arise, cannot be secured. The war in Ukraine has
disrupted production operations at the Group’s fields,
and consequently reduced anticipated cash flows from
those fields, and this has increased the risk regarding
sufficiency of capital for development. In addition, the
war may disrupt the sales market for hydrocarbons
that are produced. Currently, however, hydrocarbon
prices are reasonably strong, which is ameliorating the
potential reduction in cash flows, and the Group’s
sales counterparties are meeting their financial
obligations. In addition to the risk of operational cash
shortfalls, there is a risk that even with strong cash
flows and cash balances, the Group, from time to time,
can suffer from non-Ukrainian operational banking
appetite for businesses such as the Group’s business,
which can ultimately manifest itself in having a
restricted access to banking services.
The Group maintains adequate cash reserves and
closely monitors forecasted and actual cash flow, as
well as short and longer-term funding requirements. The
Group aims to maintain a significant proportion of its
cash resources outside Ukraine. The Group does not
currently have any loans outstanding, internal financial
projections are regularly made based on the latest
estimates available, and various scenarios are run to
assess the robustness of the Group’s liquidity. However,
as the risk to future capital funding is inherent in the oil
and gas exploration and development industry and
reliant in part on future development success, it is
difficult for the Group to take any other measures to
further mitigate this risk, other than tailoring its
development activities to its available capital funding
from time to time. The Group aims to maintain as
diverse a range of banking relationships as possible to
reduce the risks associated with limited accessibility to
banking services which may exist from time to time.
Ensuring appropriate business practices
The Group operates in Ukraine, an emerging market,
where certain inappropriate business practices may,
from time to time occur, such as corrupt business
The Group maintains anti-bribery and corruption
policies in relation to all aspects of its business, and
ensures that clear authority levels and robust approval
processes are in place, with stringent controls over cash
34
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
practices, bribery, appropriation of property and fraud,
all of which can lead to financial loss.
management and the tendering and procurement
processes. In addition, office and site protection is
maintained to protect the Group’s assets.
Hydrocarbon price risk
The Group derives its revenue principally from the sale
of its Ukrainian hydrocarbon production. These
revenues are subject to commodity price volatility and
political influence. A prolonged period of low
hydrocarbon prices may impact the Group’s ability to
maintain its long-term investment programme with a
consequent effect on its growth rate, which in turn may
impact the Company’s share price or any shareholder
returns. Lower hydrocarbon prices may not only
decrease the Group’s revenues per unit, but may also
reduce the amount of hydrocarbons which the Group
can produce economically, as would increases in
costs associated with hydrocarbon production, such
as subsoil taxes and royalties. The overall economics
of the Group’s key assets (being the net present value
of the future cash flows from its Ukrainian projects) are
far more sensitive to long term hydrocarbon prices
than short-term price volatility. However, short-term
volatility does affect liquidity risk, as, in the early stage
of the projects, income from production revenues is
offset by capital investment. In addition, the war in
Ukraine
has
disrupted
the
sales
market
for
hydrocarbons.
The Group sells a proportion of Its hydrocarbon
production through offtake arrangements, which include
pricing formulae so as to ensure that it achieves market
prices for its products, as well as utilising the electronic
market platforms in Ukraine to achieve market prices for
its remaining products. However, hydrocarbon prices in
Ukraine are, in the longer-term, linked to world
hydrocarbon prices and so the Group is subject to
external price trends, as well as shorter-term volatility in
the Ukrainian hydrocarbon market.
Currency risk
Since the beginning of 2014, the Ukrainian Hryvnia
significantly devalued against major world currencies,
including the US Dollar, where it has fallen from
UAH8.3/$1.00 on 1 January 2014 to UAH42.0/$1.00
on 31 December 2024, and UAH41.5/$1.00 on 2 June
2025. This devaluation has been a significant
contributor to the imposition of banking restrictions by
the National Bank of Ukraine over recent years. In
addition, the geopolitical events in Ukraine over recent
years and the current war in Ukraine are likely to
continue to impact the valuation of the Ukrainian
Hryvnia against major world currencies. Further
devaluation of the Ukrainian Hryvnia against the US
Dollar will affect the carrying value of the Group’s
assets.
The Group’s sales proceeds are received in Ukrainian
Hryvnia, and the majority of the capital expenditure
costs for the current investment programme will be
incurred in Ukrainian Hryvnia, thus the currency of
revenue and costs are largely matched. In light of the
previous devaluation and volatility of the Ukrainian
Hryvnia against major world currencies, and since the
Ukrainian Hryvnia does not benefit from the range of
currency hedging instruments which are available in
more developed economies, the Group has adopted a
policy that, where possible, funds not required for use in
Ukraine be retained on deposit in the United Kingdom
and Europe, principally in US Dollars.
Counterparty and credit risk
The challenging political and economic environment in
Ukraine and current war means that businesses can
be subject to significant financial strain, which can
mean that the Group is exposed to increased
counterparty risk if counterparties fail or default in their
contractual obligations to the Group, including in
relation to the sale of its hydrocarbon production,
resulting in financial loss to the Group.
The Group monitors the financial position and credit
quality of its contractual counterparties and seeks to
manage the risk associated with counterparties by
contracting
with
creditworthy
contractors
and
customers. Hydrocarbon production is sold on terms
that limit supply credit and/or title transfer until payment
is received.
Financial markets and economic outlook
The performance of the Group is influenced by global
economic conditions and, in particular, the conditions
prevailing in the United Kingdom and Ukraine. The
The Group’s sales proceeds are received in Ukrainian
Hryvnia and a significant proportion of investment
expenditure is made in Ukrainian Hryvnia, which
35
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
economies in these regions have been subject to
volatile pressures in recent periods, with the global
economy having experienced a long period of
difficulty, the COVID pandemic, and more particularly
the current war in Ukraine. This has led to extreme
foreign exchange movements in the Ukrainian
Hryvnia, high inflation and interest rates, and
increased credit risk relating to the Group’s key
counterparties.
minimises risks related to foreign exchange volatility.
However, hydrocarbon prices in Ukraine are implicitly
linked to world hydrocarbon prices and so the Group is
subject to external price movements. The Group holds
a material proportion of its cash reserves in the United
Kingdom and Europe, mostly in US Dollars, with
reputable financial institutions. The financial status of
counterparties is carefully monitored to manage
counterparty risks. Nevertheless, the overall exposure
that the Group faces as a result of these risks cannot be
predicted and many of these are outside of the Group’s
control.
Corporate risks
Ukrainian production licences
The Group operates in a region where the right to
production can be challenged by State and non-State
parties. During 2010, this manifested itself in the form
of a Ministry Order instructing the Group to suspend
all operations and production from its MEX-GOL and
SV production licences, which was not resolved until
mid-2011. In 2013, new rules relating to the updating
of production licences led to further challenges being
raised by the Ukrainian authorities to the production
licences held by independent oil and gas producers in
Ukraine, including the Group. In March 2019, a
Ministry Order was issued instructing the Group to
suspend all operations and production from its VAS
production licence, which was not resolved until March
2023. In 2020, LLC Arkona Gas-Energy (“Arkona”)
faced a challenge from PJSC Ukrnafta concerning the
validity of its SC exploration licence, which was not
ultimately resolved in Arkona’s favour until February
2021. During 2023, the Ukrainian authorities took a
number of regulatory actions against the Group, which
culminated in Ministry Orders being made in May 2023
to suspend all operations and production at the VAS
production licence and SC exploration licence, which
suspensions were not lifted until June 2024. In
November 2024, a Ministry Order was issued to
suspend all operations and production at the MEX-
GOL, SV and VAS production licences, which
suspensions, although temporarily lifted, currently
remain in force. Excepting the current suspension
orders made in respect of the MEX-GOL, SV and VAS
production licences, all such challenges affecting the
Group have been successfully defended through the
Ukrainian legal system. The business environment is
such that these types of challenges may arise at any
time in relation to the Group’s operations, licence
history, compliance with licence commitments and/or
local regulations. In addition, production licences in
Ukraine are issued with and/or carry ongoing
compliance obligations, which if not met, may lead to
the loss of a licence.
The Group ensures compliance with commitments and
regulations relating to its production and exploration
licences through Group procedures and controls or,
where this is not immediately feasible for practical or
logistical considerations, seeks to enter into dialogue
with the relevant Government bodies with a view to
agreeing a reasonable time frame for achieving
compliance or an alternative, mutually agreeable course
of action. Work programmes are designed to ensure that
all licence obligations are met and continual interaction
with Government bodies is maintained in relation to
licence obligations and commitments.
Risks relating to key personnel
The
Group’s
success
depends
upon
skilled
management as well as technical expertise and
The Group periodically reviews the compensation and
contractual terms of its staff. In addition, the Group has
36
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
administrative staff. The loss of service of critical
members from the Group’s team could have an
adverse effect on the business. The current war in
Ukraine has meant that, as far as possible, the
Group’s staff have needed to move away from areas
of conflict and work remotely.
developed relationships with a number of technical and
other professional experts and advisers, who are used
to provide specialist services as required. As a result of
the war, only essential staff are located at site, and all
other staff are working remotely, either from areas away
from the conflict areas or outside Ukraine. The Group
has invested in technology that allows many staff to
work just as effectively from remote locations.
37
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Statement by the Directors in performance of their statutory duties in accordance with
Section 172(1) of the Companies Act 2006
Introduction
The Directors of the Company must act in accordance with a set of general duties, which are detailed in Section
172(1) of the Companies Act 2006, as follows:
“A director of a company must act in the way he considers, in good faith, would be most likely to promote the
success of the company for the benefit of its members as a whole and, in doing so have regard (amongst other
matters) to:
•
the likely consequences of any decision in the long term;
•
the interests of the company’s employees;
•
the need to foster the company’s business relationships with suppliers, customers and others;
•
the impact of the company’s operations on the community and environment;
•
the desirability of the company maintaining a reputation for high standards of business conduct; and
•
the need to act fairly as between members of the company.”
The Directors are mindful of their duty to promote the success of the Company as described above. Details of
how the Directors have had regard to these matters can be found throughout this Annual Report and Financial
Statements, where we provide examples of how we: take into account the likely consequences of long-term
decisions; understand the importance of engaging with our employees; build relationships with stakeholders;
understand the impact of our operations on the communities in our region and the environment we depend
upon; attribute importance to behaving as a responsible business; and ensure that we act fairly between
shareholders.
Statement
The Directors of the Company consider, both individually and collectively, that they have acted in the way they
consider, in good faith, would be most likely to promote the success of the Company for the benefit of its
shareholders as a whole (having regard to the stakeholders and matters set out in Section 172(1)(a-f) of the
Companies Act 2006) in the decisions taken during the year ended 31 December 2024. Examples of this
include:
•
Long-term decision-making
We have a strategy for the development of our business and our oil and gas assets in Ukraine, and
retain, monitor and adjust a corporate financial model for the economic life of our assets. Our plan is
designed to have a long-term beneficial impact on the Company and to contribute to its success in safely
producing gas, condensate, oil and LPG from our fields in Ukraine. We will continue to operate our
business with robust and documented financial and operational controls and in line with safety and
environmental regulations and requirements.
•
Employees’ interests
Our employees are fundamental to the delivery of our business plan. We aim to be a responsible
employer in our approach to the remuneration and benefits that our employees receive. The health,
safety and well-being of our employees is one of our primary considerations in the way we do business,
and the training and development of our employees to develop their skills and expertise is fundamental
in the highly technical and specialised oil and gas industry.
•
Relationships with stakeholders
We aim to operate our gas, condensate and oil fields in Ukraine safely and efficiently for the benefit of
all of our stakeholders, including employees, Government, investors, local community and suppliers. In
38
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
the operational extraction and production of gas, condensate, oil and LPG, there are many risks,
including to health, safety and the environment. In our operational activities, we rigorously apply our
quality, health, safety and environmental (“QHSE”) policies to protect the safety of our employees and
contractors, and to protect the environment from pollution. In the delivery of our hydrocarbon products,
we aim to ensure that our products meet all applicable regulatory requirements and to be a reliable and
consistent supplier to our customers. We also aim to act responsibly and fairly in how we engage with
our contractors, suppliers and customers, and to co-operate with our industry regulators, all of which
are integral to the successful delivery of our business plan and the stewardship of the resources we
manage.
•
Impact on community and environment
Our business plan takes into account the impact of the Company’s operations on the community and
environment in which we operate, and our wider societal responsibilities, particularly in Ukraine at our
operational sites. Prior to the outbreak of the war, we had a broad range of corporate social responsibility
(“CSR”) initiatives in Ukraine, supporting a number of community projects, including support of local
schools (e.g. materials for repair works and funding of school meals) and youth sports, as well as the
repair of roads and local infrastructure. Since the outbreak of the war, our initiatives have focussed on
humanitarian aid, in particular the procurement of medical equipment and supplies. We also strictly
adhere to our QHSE policies in our approach to the environment and ensure compliance with applicable
health, safety and environmental regulatory requirements.
Streamlined Energy and Carbon Reporting (“SECR”)
We remain very aware of the current drive globally to monitor, reduce and report levels of energy use in
delivering Group performance, and note that SECR reporting requirements apply to the Group.
However, as our United Kingdom emissions are de-minimis, with only two full-time employees in the
United Kingdom and no operational presence, we fall below the minimum threshold and are currently
exempt from reporting such information. Notwithstanding that exemption, but subject to the restrictions
caused by the war in Ukraine, we are endeavouring to review our Ukrainian operations to determine the
processes of self-reporting for our global operations and formulating the content of our intended self-
reporting.
This initiative is intended to:
•
disclose the environment-related data currently collected, including: energy consumed, water
consumed, greenhouse gas emissions and waste generated (in natural units and relative to
volumes of extracted gas);
•
determine any additional applicable indicators to be added, for example: natural gas and solid
fuel consumed for heating, compressors and other equipment; diesel fuel used in diesel
generators; consumption of petrol and diesel in vehicles, etc.;
•
determine potential benchmarks; and
•
determine the reporting frequency.
We will keep shareholders updated on this initiative of recognised significance.
•
Business conduct
We aim to ensure that the Company behaves responsibly in the wider community, and that our business
is operated in a responsible manner, operating within the high standards of business conduct and good
governance expected for a business such as ours. We have in place, and monitor adherence to, our
Anti-Bribery and Corruption Policy and a range of QHSE related policies. This approach contributes to
the delivery of our business plan by ensuring we work in an honest and ethical way, and we require the
same from our employees, contractors and others connected with the business.
39
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
•
Fair engagement with shareholders
Our intention is always to behave responsibly toward our shareholders and treat them fairly and equally,
so they, too, may benefit from the successful delivery of our business plan. In light of our significant
majority shareholder, we have in place a Relationship Agreement to ensure that the management and
governance of the Company is and remains independent. We have adopted and, subject to limited
exceptions, adhere to the Quoted Companies Alliance Corporate Governance Code 2018 (“QCA Code”)
to ensure clearly defined governance procedures within our business.
Strategic Report Approval
The Strategic Report, which incorporates Highlights, Chairman’s Statement, Chief Executive’s Statement,
Business Model, Our Strategic Priorities, Overview of Assets, Overview of Reserves, Finance Review, Key
Performance Indicators, Sustainability, Principal Risks and Uncertainties and Statement under s172(1) of the
Companies Act 2006, was approved by the Board on 12 June 2025 and signed on its behalf by:
Chuck Valceschini
Chairman
40
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Corporate Governance
Board of Directors
Chuck Valceschini
Non-Executive Chairman
Chuck Valceschini was appointed as Non-Executive Chairman in March 2024. Mr Valceschini is an
experienced senior executive and director, with extensive knowledge of the global oil and gas industry. He
commenced his career in technical and operational roles with Marathon Oil Corporation in the United States.
He then moved to similar roles in international postings with IPR Energy Group and Nobel Oil. He subsequently
joined Anglo Albanian Petroleum, American Energy Group, Hycarbex Inc and Severtek LLC, and then TNK-
BP and BP plc in senior technical and management roles. He subsequently founded Valceschini & Associates
LLC to provide technical and commercial services to the oil and gas industry. He has also been a Director of
Block Energy and Chairman of JKX Oil & Gas. Mr Valceschini has a BSc in Petroleum Engineering from the
University of Wyoming, and an MSc in Engineering Management from Portland State University. He is a
member of the Society of Petroleum Engineers.
Audit Committee Chairman
Remuneration Committee Member
Nomination Committee Chairman
HSE Committee Member
Oleksiy Zayets
Chief Executive Officer and Director
Oleksiy Zayets was appointed as Interim Chief Executive Officer in March 2024, as a Director in October 2024,
and as Chief Executive Officer in March 2025, and is a nominee of the Company's indirect majority
shareholder, Smart Holding (Cyprus) Limited. Mr Zayets joined the Company in September 2018, and was
appointed as Chief Financial Officer of the Company’s Ukrainian operations in June 2019. Mr Zayets is an
experienced financial management executive, having previously held financial management roles with DTEK
Holdings Group, including as Chief Financial Officer of a gas production company and a heat and power
generation company. Mr Zayets is a Certified Accounting Practitioner, and has a BA Heat and Power
Engineering from the Donetsk State Academy of Management (Ukraine) and an MBA from the National
University of Kyiv-Mohyla Business School (Ukraine).
Audit Committee Member
Bruce Burrows
Finance Director
Bruce Burrows was appointed as Finance Director in June 2019, having previously been a Non-Executive
Director since August 2017. Mr Burrows has extensive experience in the oil and gas industry, and, in particular,
Ukraine and Eastern Europe, having been Finance Director of JKX Oil & Gas for 14 years until 2011. Since
then, he has been Chief Financial Officer of Seven Energy International, Lekoil, and AITEO Group, and has
served as a non-executive Director of Azonto Petroleum and European Goldfields. Mr Burrows is a member
of the Institute of Chartered Accountants of Australia & New Zealand, and holds a BSc Honours from
Canterbury University (New Zealand) and a Diploma in Accounting from Victoria University (New Zealand).
Nomination Committee Member
41
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Dr Gehrig Schultz
Non-Executive Director
Gehrig Schultz became a Non-Executive Director in August 2022. He is a geophysicist with extensive
experience in the global oil and gas industry. He commenced his career in South America, with management
roles with Western Geophysical and Grant Geophysical, before joining PGS Onshore to assist with the
development of its geophysical business worldwide. He was then Chairman and Chief Executive Officer of
Prospectiuni S.A. and Chairman of Tender Oil & Gas, before founding Surus Geophysical B.V. to provide
geophysical consulting services. He joined EPI Limited in 2018 as Chief Operating Officer of Geoscience, and
currently leads the geoscience division. Mr Schultz has a BSc in Geophysical Engineering from the Colorado
School of Mines, and a PhD in Geophysics from the University of Bucharest.
Audit Committee Member
Remuneration Committee Chairman
HSE Committee Chairman
Alexey Pertin
Non-Executive Director
Alexey Pertin was appointed as a Non-Executive Director in April 2011 and is a nominee of the Company's
indirect majority shareholder, Smart Holding (Cyprus) Limited. He is currently a Director of Smart Holding N.V.,
and was previously Chairman of the Supervisory Board of PJSC Smart-Holding, and before that Chief
Executive Officer and Strategy and Corporate Development Director of PJSC Smart-Holding. Prior to joining
the Smart Holding Group, he held various management roles in the metallurgical industry. Mr Pertin graduated
from Saint Petersburg State Technical University with qualifications in financial management, and he also
holds an MBA from Newcastle Business School, England.
HSE Committee Member
Oleksandr Blyzniuk
Non-Executive Director
Oleksandr Blyzniuk was appointed as a Non-Executive Director in January 2025 and is a nominee of the
Company’s indirect majority shareholder, Smart Holding (Cyprus) Limited. Mr Blyzniuk is an experienced
lawyer, having previously held senior legal roles with TNK-BP Ukraine and Metinvest Holding, before joining
the Smart Holding Group as Director of Legal Support in 2024. Mr Blyzniuk is qualified to practice law in
Ukraine, and has an MA with honours in Jurisprudence from the Taras Shevchenko National University of Kyiv
in Ukraine. Mr Blyzniuk was also previously the Head of the All-Ukrainian Lawyers Assistance Association.
Remuneration Committee Member
Nomination Committee Member
42
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Corporate Governance Statement
The Company has adopted the Quoted Companies Alliance Corporate Governance Code 2018 (“QCA Code”).
This statement sets out how the Company complies with, or departs from, the 10 principles of the QCA Code.
1. Strategy and business model
The Group is engaged in the exploration and development of oil and gas projects, with assets in Ukraine.
The Directors of the Company set the Company’s strategy and monitor its implementation through
management and financial performance reviews. The Board also works to ensure that adequate resources are
available to implement the Company’s strategy in a timely manner. The Company has set out a strategy and
business model (including the key challenges to its implementation) to promote long-term value creation for
shareholders and will update all shareholders on this in its Annual Report each year.
The Board meets on a regular basis to discuss the strategic direction of the Company and any significant
deviation or change will be highlighted promptly should this occur.
2. Understanding and meeting shareholders’ needs and expectations
The Company is committed to listening to, and communicating openly with, its shareholders to ensure that its
strategy, business model and performance are clearly understood. The Annual General Meeting is a forum for
shareholders to engage in dialogue with the Board. The results of the Annual General Meeting are published
via a regulatory information service and can be found in the News section of the Company’s website at
www.enwell-energy.com.
Chuck Valceschini, Chairman, Oleksiy Zayets, Chief Executive Officer, and Bruce Burrows, Finance Director,
are the principal contacts between the Company and its shareholders, with whom they each maintain a regular
dialogue. The views of shareholders are communicated to the whole Board.
The Company’s progress on achieving its key targets is regularly communicated to investors through its
announcements to the market. The Company also utilises other professional advisers such as the Company’s
Nominated Adviser, Broker and the Company Secretary, who provide advice and recommendations on
shareholder communication.
3. Taking into account wider stakeholder and social responsibilities and their implications for long-
term success
The Board members recognise their responsibilities to stakeholders including staff, suppliers, customers,
regulators and within the communities in which the Company operates. The Company has senior managers
of its operating divisions who provide regular feedback to the Chief Executive Officer, who then ensures that
the Board as a whole is informed of any major developments. In turn, the Board communicates with
management and staff on key issues which may affect them in connection with the Group’s business.
The Company is involved in the local communities close to its operations through sponsorship and community
projects and activities. Careful attention is given to ensure that all operational activities are performed in an
environmentally responsible manner and in accordance with applicable laws and regulations. Both the
involvement in local communities and the performance of operational activities in an environmentally
responsible manner are monitored by the Board to ensure that ethical values and behaviours are recognised.
4. Embedding effective risk management
The Board regularly reviews the risks facing the business and the internal controls which are in place to
address these risks. The Company has a Management Risk Committee that monitors the Group’s business
operations and identifies key risks that are faced. The Management Risk Committee maintains a Risk Register
and Mitigation Plan that is formally reviewed and updated quarterly. The Management Risk Committee
regularly reports to the Board on risk management and mitigation.
43
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
The Company is committed to maintaining the highest quality, health, safety and environment (“QHSE”)
standards and the effective management of these areas is an intrinsic element of the overall business ethos.
The Company has a Health, Safety and Environment Committee that oversees and monitors the Group’s
activities and adherence to its QHSE policies, as well as supervising the updating and implementation of such
policies. The Health, Safety and Environment Committee meets regularly and reports to the Board on all QHSE
matters. Through strict enforcement of the Group’s QHSE policies, together with regular management
meetings, training and the appointment of dedicated safety professionals, the Company strives to ensure that
the impact of its business activities on its staff, contractors and the environment is as low as is reasonably
practicable. The Company reports safety and environmental performance in accordance with oil industry
practice and guidelines.
The Board is responsible for the Group’s system of internal control and reviewing its effectiveness. Any such
system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance against material misstatement or loss. However, the
Company believes that its internal control systems are appropriate to the Company’s business. Internal
controls are assessed for effectiveness and risks are monitored and reviewed through regular Board and
management meetings.
5. Maintaining a balanced and well-functioning Board
In the spirit of the QCA Code, it is the Board’s function to ensure that the Company is managed for the long-
term benefit of all shareholders and other stakeholders with effective and efficient decision-making. Corporate
governance is an important part of that function, reducing risk and adding value to the Company. The Chairman
oversees Corporate Governance compliance for the Company and the Board monitors the governance
framework of the Company on an ongoing basis.
As an AIM-quoted company, the Company is required to apply a recognised corporate governance code,
demonstrating how it complies with such corporate governance code and where it departs from it.
The Board has formally adopted the QCA Code as the basis for its corporate governance framework. The
Board recognises the principles of the QCA Code, which focus on the creation of medium to long-term value
for shareholders. The Company will provide annual updates on its compliance with the QCA Code in its Annual
Reports.
The composition of the Board is as follows:
Board Member
2024 Meetings Attended
(out of a total possible)
Chuck Valceschini (Chairman) *
6/6
Bruce Burrows
Oleksiy Zayets ***
7/7
0/0
Gehrig Schultz
6/7
Alexey Pertin
1/7
Oleksandr Blyzniuk *****
0/0
Chris Hopkinson **
1/1
Sergii Glazunov **
1/1
Yuliia Kirianova ****
Igor Basai ******
2/6
3/6
*appointed 7 March 2024 / **resigned 7 March 2024
***appointed 24 October 2024 / ****resigned 24 October 2024
*****appointed 31 January 2025 / ******resigned 31 January 2025
The Board comprises six Directors, being the Non-Executive Chairman, the Chief Executive Officer, the
Finance Director and three Non-Executive Directors, reflecting a blend of different experience and
backgrounds. The Non-Executive Chairman is Chuck Valceschini. The Chief Executive Officer and two of the
44
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Non-Executive Directors are nominees of Smart Holding (Cyprus) Limited, the indirect majority shareholder of
the Company. The Company has entered into a Relationship Agreement with Smart Holding (Cyprus) Limited,
which regulates the relationship between them to ensure that the business and affairs of the Company are
managed by the Board, independently of Smart Holding (Cyprus) Limited and its associated entities. The Board
also has procedures in place to monitor and deal with Directors’ conflicts of interest. The Directors are expected
to devote such time as is necessary for the proper performance of their respective duties. The Executive
Directors are employees of the Group, and the Non-Executive Directors are expected to spend a minimum
number of days on the Group’s business each year. The Board considers Chuck Valceschini and Gehrig
Schultz to be independent Non-Executives in terms of the QCA guidelines, although given the size of the
Company, the Board has not appointed a senior independent Director.
The Board is responsible for setting the direction of the Company through the establishment of strategic
objectives and key policies. The Board has a schedule of matters reserved for its review and approval, and
such items include Group strategy, approval of major capital expenditure projects, approval of the annual and
interim results, annual budgets, dividend policy, Board composition and structure, and appointment and
assessment of senior management. The Board monitors the exposure to key business risks and reviews the
strategic direction of all operating subsidiaries, their annual budgets, their performance in relation to those
budgets and their capital expenditure. The Board maintains its independence from the day-to-day responsibility
for managing the business which it delegates to the Chief Executive Officer and the senior management team.
The Chief Executive Officer, being the senior executive, has a particular role and areas of responsibility and
engages with the Company’s shareholders and stakeholders as required.
Regular Board meetings are held (a minimum of four per year) and ad hoc meetings are scheduled as required.
The attendance at Board and Committee meetings during the year will be reported in the Annual Report. All
Directors have access to management, including the Company Secretary, and to such information as is
needed to carry out their duties and responsibilities fully and effectively. Furthermore, all Directors are entitled
to seek independent professional advice concerning the affairs of the Company, at its expense.
All Directors are subject to election by shareholders at the first opportunity following their appointment by the
Board. In addition, Directors will retire by rotation and stand for re-election by shareholders at least once every
three years in accordance with the Company’s Articles of Association.
Further details of the Board of Directors, and their roles and background, are set out in the preceding pages
of this Report.
6. Having appropriate experience, skills and capabilities on the Board
The Board has a mix of experience, skills, linguistic and personal qualities that help deliver the strategy of the
Company, including managerial, technical and financial expertise in the oil and gas industry. The composition
of the Board ensures that no one individual or group dominates the decision-making process. The Company
will ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
to deliver the Company’s strategy and targets. The Directors keep their respective skills up-to-date through a
combination of attendance at relevant industry events and conferences, continued professional development
and experience gained from other board and management roles.
7. Evaluating Board performance
Given the Company’s current size, the Board has not considered it necessary to undertake an external
assessment of the Board performance and effectiveness during the period, but monitors for any such need.
8. Ethical values and behaviours
The Company operates a corporate culture that is based on ethical values and behaviours. It maintains a
quality system appropriate to the standards required for a Company of its size. The Board communicates
regularly with management through meetings and messages, and information is cascaded to staff at operating
subsidiaries via management meetings with operational personnel.
45
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
The Company maintains appropriate policies which reflect these values, including an Anti-Bribery and
Corruption Policy in relation to its compliance with the Bribery Act 2010, and Policies on Disclosure of Inside
Information and Share Dealing. These policies set out the high ethical standards required of the Group’s staff
in the course of carrying out its business activities regarding dealing with gifts, hospitality, corruption, fraud,
the use of inside information and whistle-blowing.
9. Maintaining governance structures and processes
The Board
In addition to the Chairman’s Statement and explanation provided under principle 5 above, the Chairman is
responsible for the leadership of the Board and is pivotal to fostering a culture that adopts good corporate
governance.
The Chairman, together with the rest of the Board, sets the direction for the Company through a formal
schedule of matters reserved for its decision. The Chief Executive Officer, as the senior executive, has a
particular role and areas of responsibility and engages with the Company’s shareholders and stakeholders as
required. The Board has a schedule of matters reserved for its review and approval, and such items include
Group strategy, approval of major capital expenditure projects, approval of the annual and interim results,
annual budgets, dividend policy, Board composition and structure, and the appointment and assessment of
senior management. The Board monitors the exposure to key business risks and reviews the strategic direction
of all operating subsidiaries, their annual budgets, their performance in relation to those budgets and their
capital expenditure. The Board delegates day-to-day responsibility for managing the business to the Chief
Executive Officer and the senior management team.
Committees
The Board has established four committees, being the Audit Committee, Remuneration Committee,
Nomination Committee and Health, Safety and Environment Committee. The Audit Committee is composed of
two independent Non-Executive Directors (Chuck Valceschini and Gehrig Schultz) and an Executive Director
(Oleksiy Zayets) who is a nominee of Smart Holding (Cyprus) Limited, the indirect majority shareholder of the
Company. The Remuneration Committee is composed of two independent Non-Executive Directors (Chuck
Valceschini and Gehrig Schultz) and a Non-Executive Director (Oleksandr Blyzniuk) who is a nominee of Smart
Holding (Cyprus) Limited. The Nomination Committee is composed of an independent Non-Executive Director
(Chuck Valceschini), an Executive Director (Bruce Burrows) and a Non-Executive Director (Oleksandr
Blyzniuk) who is a nominee of Smart Holding (Cyprus) Limited. The Health, Safety and Environment
Committee is composed of two independent Non-Executive Directors (Chuck Valceschini and Gehrig Schultz)
and a Non-Executive Director (Alexey Pertin) who is a nominee of Smart Holding (Cyprus) Limited. The QCA
Code recommends that the membership of these committees is made up of only independent non-executive
directors, but given the size of the Company and the fact that three of the Directors are nominees of Smart
Holding (Cyprus) Limited, the Board considers that the composition of these Committees is appropriate in the
circumstances.
Audit Committee
The Audit Committee meets not less than twice a year to review the published financial information, and the
effectiveness of external audit and internal financial controls. It deals with the appointment, terms of
engagement and fees of the external Auditors, the scope of the audit, review of the financial statements and
reports, including any changes to accounting policies or practices, and the review of the Group’s system of
risk management and internal controls and compliance with applicable laws and regulations. Meetings are
normally attended, by invitation, by a representative of the Auditors.
46
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
The composition of the Audit Committee is as follows:
Committee Member
2024 Meetings Attended
(out of a total possible)
Chuck Valceschini (Chairman) *
2/2
Gehrig Schultz
2/2
Oleksiy Zayets ****
Yuliia Kirianova ***
0/0
1/2
Bruce Burrows **
0/0
Chris Hopkinson **
0/0
*appointed 7 March 2024 / **resigned 7 March 2024
*** resigned 24 October 2024 / ****appointed 12 June 2025
Remuneration Committee
The Remuneration Committee is responsible for establishing and developing the Company’s general policy on
executive and senior management remuneration, having regard to the need to attract and retain individuals of
the highest calibre and with the appropriate experience to make a significant contribution to the Group, and
determining specific remuneration packages for Executive Directors and senior management.
The composition of the Remuneration Committee is as follows:
Committee Member
2024 Meetings Attended
(out of a total possible)
Gehrig Schultz (Chairman)
2/2
Charles Valceschini *
1/1
Oleksandr Blyzniuk ****
Igor Basai ***
0/0
1/1
Bruce Burrows **
1/1
Chris Hopkinson **
0/0
*appointed 7 March 2024 / ** resigned 7 March 2024
*** resigned 31 January 2025 / ****appointed 12 June 2025
Nomination Committee
The Nomination Committee is responsible for overseeing the Company’s recruitment of Directors and senior
executive management, reviewing the composition and evaluating the expertise of the Board and senior
executive management and ensuring that a process is in place for orderly succession to Board and senior
management positions. The Nomination Committee was established in June 2024.
The composition of the Nomination Committee is as follows:
Committee Member
2024 Meetings Attended
(out of a total possible)
Charles Valceschini (Chairman)
0/0
Bruce Burrows
0/0
Igor Basai *
Oleksandr Blyzniuk **
0/0
0/0
*resigned 31 January 2025 / **appointed 12 June 2025
Health, Safety and Environment Committee
The Health, Safety and Environment Committee meets not less than once a year to oversee and monitor
QHSE matters affecting the Company and its business activities. It is responsible for the supervision of QHSE
matters, including evaluation of the effectiveness of QHSE policies, assessment of Group performance
regarding the impact of decisions relating to QHSE issues, oversight of compliance of QHSE policies with
applicable international and oil industry practice and guidelines, and development and maintenance of the
framework of QHSE policies for the management and reporting of QHSE issues affecting the Group. During
the period, there was frequent communication between the HSE Committee members in relation to their remit,
47
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
despite no formal meetings being convened, this being dictated by the disruption and adjustment to work
locations and practices caused by the war in Ukraine.
The composition of the Health, Safety and Environment Committee is as follows:
Committee Member
2024 Meetings Attended
(out of a total possible)
Gehrig Schultz (Chairman)
0/0
Chuck Valceschini *
0/0
Alexey Pertin *
0/0
Chris Hopkinson **
0/0
Sergii Glazunov **
0/0
*appointed 7 March 2024 / **resigned 7 March 2024
10. Communicating with shareholders and other relevant stakeholders
The Board recognises that it is accountable to shareholders for the performance and activities of the Company
and the Group. The Board engages in discussions with shareholders as appropriate from time to time through
formal meetings or correspondence and audio-visual and telephone discussions. The Annual General Meeting
of the Company provides an opportunity for the Directors to present to shareholders a report on current
operations and developments and enables shareholders to express their views about the Company’s business.
As required by Rule 26 of the AIM Rules for Companies, the Company publishes historical Annual Reports,
Interim Reports, Notices of General Meetings and all announcements since the Company’s admission to the
AIM Market, which are available in the News section of its website at www.enwell-energy.com.
The Board does not publish an Audit Committee or Remuneration Committee report in its Annual Report as
the Board considers this is not appropriate given the size and stage of development of the Company. The
Board will consider annually whether it considers it appropriate for these reports to be included in future Annual
Reports.
48
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Directors’ Report
The Directors present their Annual Report and the audited consolidated financial statements for the year ended
31 December 2024.
Statement under Section 172(1) of the Companies Act 2006
The Statement by the Directors in the performance of their statutory duties in accordance with Section 172(1) of
the Companies Act 2006 is set out in the Strategic Report.
Future Developments
The future developments relating to the Group are described in the Strategic Report, and are therefore not
repeated in the Directors’ Report in accordance with Section 414C(11) of the Companies Act 2006 and related
statutory requirements.
Dividends
The Directors do not recommend the payment of a dividend (2023: interim dividend of £0.15 per ordinary share
and no final dividend).
Capital Structure
Details of the issued share capital, together with details of the movements in the Company's issued share
capital during the year, are shown in Note 26. The Company has one class of ordinary shares which carry no
right to fixed income. Each share carries the right to one vote at general meetings of the Company.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed
by the general provisions of the Articles of Association of the Company and prevailing legislation. The Directors
are not aware of any agreements between holders of the Company's shares that may result in restrictions on
the transfer of securities or on voting rights.
No person has any special rights of control over the Company's share capital and all issued shares are fully
paid.
With regard to the appointment and replacement of Directors, the Company is governed by its Articles of
Association, the Companies Act 2006 and related legislation. The Articles of Association themselves may be
amended by special resolution of the shareholders. The powers of the Directors are described in the Corporate
Governance Statement.
Directors and Directors’ Interests
The Directors who held office during the year and up to the date hereof were as follows:
Chris Hopkinson (resigned 7 March 2024)
Sergii Glazunov (resigned 7 March 2024)
Alexey Pertin
Yuliia Kirianova (resigned 24 October 2024)
Bruce Burrows
Gehrig Schultz
Chuck Valceschini (appointed 7 March 2024)
Igor Basai (appointed 7 March 2024 / resigned 31 January 2025)
Oleksiy Zayets (appointed 24 October 2024)
Oleksandr Blyzniuk (appointed 31 January 2025)
None of the Directors who held office at the end of the financial year had any disclosable interest in the shares
of the Company or any other Group companies.
49
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
According to the register of Directors’ interests, no rights to subscribe for shares in or debentures of Group
companies were granted to any of the Directors or their immediate families, or exercised by them, during the
financial year.
Directors’ Indemnities
The Company has made qualifying third party indemnity provisions for the benefit of its Directors in accordance
with Section 234 of the Companies Act 2006, which were made during the year and remain in force at the date
of this report.
Political Contributions
During the year the Group did not make any political contributions (2023: $nil).
Financial Risk Management
The Group’s financial risk management is disclosed in the Strategic Report, and is therefore not repeated in
the Directors’ Report in accordance with Section 414C(11) of the Companies Act 2006 and related statutory
requirements.
Post Balance Sheet Events
Details of significant events since the Balance Sheet date are contained in Note 32.
Substantial Shareholders
As at 11 June 2025, the Company had been notified of the following interests of 3% or more in its issued share
capital:
Substantial Shareholder
Number of
shares
% of issued
ordinary
share capital
Smart Energy (CY) Limited *
264,996,769
82.65%
Pope Asset Management
22,273,339
6.95%
* Smart Energy (CY) Limited is 100% owned by Smart Holding (Cyprus) Limited.
Going Concern Assessment
The Directors have assessed the ability of the Group and the Company to continue as a going concern,
including considering the impact of the ongoing war in Ukraine and the regulatory actions of the Ukrainian
authorities, and the results of this assessment are set out in Note 2.
Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law,
the Directors have prepared the Group and Company financial statements in accordance with UK-adopted
international accounting standards.
50
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Under company law, the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the
Group for that period. In preparing the financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
•
state whether applicable UK-adopted international accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements;
•
make judgements and accounting estimates that are reasonable and prudent; and
•
prepare the financial statements on a going concern basis unless it is inappropriate to presume that the
Group and Company will continue in business.
The Directors are responsible for safeguarding the assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to ensure that the financial statements comply
with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the
United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors’ Confirmations
In the case of each Director in office at the date the Directors’ Report is approved:
•
so far as the Director is aware, there is no relevant audit information of which the Group’s and
Company’s Auditors are unaware; and
•
the Director has taken all the steps that he ought to have taken as a Director in order to make himself
aware of any relevant audit information and to establish that the Group’s and Company’s Auditors are
aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the
Companies Act 2006.
Independent Auditors
A resolution to reappoint Zenth Audit Ltd as Independent Auditors will be proposed at the next Annual General
Meeting.
On behalf of the Board
Chuck Valceschini
Chairman
12 June 2025
51
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Independent Auditors’ Report to the members of Enwell Energy plc
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Enwell Energy plc (the “Company”) and together with its
subsidiaries (the ”Group”). These financial statements are included within the Annual Report and Financial
Statements (the "Annual Report"), which comprise: the consolidated and company balance sheets as at 31
December 2024, the consolidated income statement, the consolidated and company statements of
comprehensive income, the consolidated and company cash flow statements, and the consolidated and
company statements of changes in equity for the year then ended; and the notes to the financial statements,
which include a description of the significant accounting policies.
In our opinion, Enwell Energy plc's Group financial statements and C ompany financial statements (the
"financial statements"):
•
give a true and fair view of the state of the Group's and of the Company's affairs as at 31 December 2024
and of the Group's profit for the year then ended;
•
have been properly prepared in accordance with UK-adopted international accounting standards; and
•
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities
for the audit of the financial statements section of our report. We are independent of the Company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applicable to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern assumption on the Company financial statements
In auditing the Company financial statements, we have concluded that the Directors' use of the going concern
basis of accounting in the preparation of the Company financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as
a going concern for a period of at least twelve months from when the financial statements are authorised for
issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report. However, because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Company’s ability as a going concern.
Material uncertainty related to going concern on the Group financial statements
In forming our opinion on the Group financial statements, which is not modified, we have considered the
adequacy of the disclosure made in Note 2 to the financial statements concerning the Group's ability to
continue as a going concern. The Group's operations are entirely based in Ukraine. On 24 February 2022, the
Russian Federation commenced a military invasion of Ukraine which disrupted operations at the Group’s field
locations. As described in Note 2 “Going concern” to the financial statements, following the adoption of new
legislation, the Ukrainian authorities suspended in November 2024 the MEX-GOL, SV and VAS production
licences for a period of 10 years. The future development of this conflict and the future actions of the Ukrainian
state authorities are inherently uncertain and might have potential short and long-term impact on the Group's
operations, staff and assets in Ukraine. These conditions, along with the other matters explained in Note 2 to
the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about
the Group's ability to continue as a going concern and realise its assets in the normal course of business. The
52
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Group financial statements do not include the adjustments that would result if the Group were unable to
continue as a going concern.
In auditing the Group financial statements, we have concluded that the Directors' use of the going concern
basis of accounting in the preparation of the Group financial statements is appropriate.
Our evaluation of the Directors' assessment of the Group's ability to continue to adopt the going concern basis
of accounting included:
•
We obtained the Directors' assessment and conclusions with respect to going concern.
•
We discussed the going concern assessment with management and those charged with governance
and challenged the key assumptions, estimates and judgements made in the assessment.
•
We tested the cash flow models used in the going concern assessment.
•
We assessed the likelihood of the different scenarios and sensitivities considered by the Directors, with
specific consideration of the potential impact of the Russian military invasion of Ukraine and the potential
suspension of the SC exploration licence by the state authorities in Ukraine.
•
We discussed with the Group legal advisers the measures taken by the Group to defend its business
and assets in Ukraine
•
We considered the appropriateness of the disclosures made in respect of going concern in the Group
financial statements.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report.
Our audit approach
Overview
Audit scope
•
In addition to the statutory audit of the parent company, we conducted full scope audits of two significant
components out of the Group's six components which were selected due to their size and risk
characteristics. An audit of one or more account balances, classes of transactions or disclosures was
performed at a further four components.
•
This enabled us to obtain coverage of 100% of consolidated revenue, 100% coverage of consolidated
profit before tax and 100% coverage of consolidated total assets of the Group.
Key audit matters
•
Material uncertainty related to going concern (refer to 'Material uncertainty related to going concern
assumption on the Group financial statements' above).
•
Carrying value of investments in, and loans to, subsidiary undertakings (parent).
Materiality
•
Overall Group materiality: US$2,402,000 (2023: US$2,921,000) based on 5% of three-year average
(2023: three-year average) profit before tax adjusted for non-recurring items.
•
Overall Company materiality: US$917,000 (2023: US$925,000) based on 1% of total assets.
•
Performance materiality: US$1,802,000 (2023: US$2,191,000) (Group) and US$687,000 (2023:
US$845,000) (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in
the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in
the audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by the auditors, including those which had the
greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters, and any comments we make on the results of our procedures
53
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
In addition to going concern, described in the 'Material uncertainty related to going concern assumption on the
Group financial statements' section above, we determined the matters described below to be the key audit
matters to be communicated in our report. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Carrying value of investments in, and loans to,
subsidiary undertakings (parent)
Refer to Note 3 'Significant Accounting Judgements
and Estimates' and Note 19 'Investments and Loans
to Subsidiary Undertakings'. As at 31 December
2024, the Company had a total investment in
subsidiaries of US$59.8 million (2023: US$69.9
million) comprising investment in shares of
US$29.6 million (2023: US$30.7 million) and long-
term investment loans of US$30.2 million (2023:
US$39.2 million).
At the balance sheet date, management updated its
assessment of the expected credit loss on the
Company's intercompany receivable and determined
that the provision against the receivable should be
increased
by
US$10
million.
In
addition,
management updated its assessment of the
recoverable amount of the Company's investments in
its subsidiaries and determined that an impairment
loss of US$1 million should be recognised.
The assessment
of the recoverability of the
investments' carrying value involves subjective
judgements about future business performance, with
key assumptions including cash flows and discount
rates. The assessment of expected credit loss
requires subjective judgements and estimates of the
timing of future cash flows.
Accordingly, this was an area of focus for our audit
as there is a risk that the carrying value of the
Company's investments in subsidiaries and the
intercompany
receivables could be materially
misstated.
To address the risk that the carrying amount of
investments
in,
and
loans
to,
subsidiary
undertakings as at 31 December 2024, may be
misstated,
we
performed
the
following
procedures:
- Discussed
with
management
the
key
assumptions used;
- Evaluated the overall methodology applied in
management's assessment of the expected credit
losses on loans to subsidiaries and determination
of the recoverable amounts of investments in
subsidiaries
for
reasonableness
and
appropriateness, and verified the mathematical
accuracy of the related cash flow models;
- Validated the assumptions used by management
by agreeing or comparing them to external and
internal sources, where appropriate; recalculated
the weighted average cost of capital using inputs
from external sources;
- Agreed internally generated assumptions to the
approved budgets and management plans;
- Performed sensitivity analysis to understand if
reasonably possible changes in management's
assumptions would result in a material change in
the balances.
We concur with management's conclusions in
respect of the carrying amount of investments in,
and loans to, subsidiary undertakings as at 31
December 2024 and the resulting impact on profit
or loss.
We verified that the Company's assessment was
appropriately accounted for and disclosed in the
Company financial statements for the year ended
31 December 2024, including the disclosure of
applicable estimates and judgements.
54
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Impairment of oil and gas assets in a significant
component (Group)
At 31 December 2024, the carrying amount of oil and
gas assets of the main Group subsidiary was
US$58.7 million. At the year end, management
performed an impairment review of these assets by
calculating and comparing their value in use (VIU) to
their carrying amount.
This area was a key audit matter for us due to the
materiality
of
amounts
involved,
significant
judgements and estimates applied by management
in calculating the value in use and the uncertainties
related to the suspension of production licences
connected to these assets.
To address the risk that the carrying amount of oil and
gas assets as at 31 December 2024, may be
misstated, we performed the following procedures:
- Evaluated the overall methodology applied in
the management's calculation of Value in use;
- Checked the arithmetical accuracy of the VIU
calculation, validity of the applied discount rate
and correctness of input data;
- Engaged an audit expert to conduct an
analysis of the key assumptions and valuation
methods used by management;
- Discussed
with
management
and
the
Company’s legal expert the status and expected
outcome of legal proceedings related to the
suspension of production licences.
We concur with management's conclusions in
respect of the carrying amount of oil and gas
assets as at 31 December 2024 and the resulting
impact on profit or loss;
We verified that the Company's assessment was
appropriately accounted for and disclosed in the
Group’s financial statements for the year ended 31
December 2024, including the disclosure of
applicable estimates and judgements.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the structure of the Group and the Company, the
accounting processes and controls, and the industry in which they operate.
The Group is structured as two operating segments on a geographical basis: the UK head office and Ukrainian
oil and gas exploration, development and production. The consolidated financial statements are a consolidation
of six legal entities, comprising the Group's operating businesses and centralised functions.
Day-to-day management of the operations of the Group and the Company, including accounting and financial
reporting, is undertaken in Kyiv, Ukraine. Accordingly, a significant portion of our audit work was undertaken in
Kyiv on our behalf by Ukrainian component auditors, part of a reputable international accounting network. In
establishing the overall approach to the Group audit, we determined the type of work that needed to be performed
by us, as the group audit team, or by the local firm in Ukraine, as a component audit team.
We conducted full scope audits of the parent company and of two components out of the Group's six
components which were selected due to their size and risk characteristics. We audited the parent company
financial statements and the component auditors audited the two local significant components which were a
representative office and a subsidiary whereas we performed specific scope procedures for the holding
company. An audit of one or more account balances, classes of transactions or disclosures was performed at
a further four insignificant components. We carried out three of these specific scope procedures and the
component team carried out one specific scope engagement.
55
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Further specific audit procedures relating to the consolidation, compliance with laws and regulations outside of
Ukraine including the audit of UK tax, and procedures relating to the appropriate presentation and disclosure
of the Annual Report and Financial Statements were performed directly by us as the group audit team.
This enabled us to obtain coverage of 100% of consolidated revenue, 100% coverage of consolidated profit
before tax and 100% coverage of consolidated total assets of the Group.
Where work was performed by our component team in Ukraine, we determined the level of involvement we
needed to have in their work to ensure sufficient appropriate audit evidence had been obtained as a basis for
our opinion on the financial statements. We conducted our oversight through regular dialogue via video
conferencing, calls and other forms of communication as considered necessary and appropriate in the
circumstances throughout the planning, execution, and completion phases of the audit. In addition, we
performed a review of component auditor working papers to satisfy ourselves that the appropriate audit work
had been performed. We also attended key meetings virtually with management in Ukraine and our component
team.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Financial statements - Group
Financial statements - Company
Overall
materiality
US$2,402,000 (2023: US$2,921,000).
US$917,000 (2023: US$925,000).
How we
determined it
5% of three-year average (2023: three-year
average) profit before tax adjusted for non-
recurring ·items
1% of total assets
Rationale for
benchmark
applied
Profit before tax is the primary measure used by
the shareholders in assessing the performance
of the Group and is a generally accepted
auditing benchmark. The Group's earnings are
heavily influenced by the realised selling price of
gas and, despite the relatively stable level of
production in the last three years, profit for the
current year is showing a decreasing trend.
Therefore, it was considered to be appropriate
to use an average of profit before tax and the
three-year average profit before tax (2023:
three-year average) was considered to be the
most appropriate benchmark.
We believe that total assets is the
primary measure used by shareholders
in assessing the performance of the
Company, and is a generally accepted
auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall
Group materiality. The range of materiality allocated across components was between US$961,000 and
US$1,441,000. Certain components were audited to a local statutory audit materiality that was also less than
our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance
materiality in determining the scope of our audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining sample sizes. Due to this being our third
year audit, our performance materiality remained at 75% (2023: 75%) of overall materiality, amounting to
56
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
US$1,802,000 (2023: US$2,191,000) for the Group financial statements and US$687,000 (2023: US$965,000)
for the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements,
risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount in the
upper range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during
our audit above US$120,000 (2023: US$146,000) for the Group audit and above US$46,000 (2023:
US$46,000) for the Company audit, as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors' report thereon. The Directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent
material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors' Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report
certain opinions and matters as described below.
Strategic Report and Directors' Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
Report and Directors' Report for the year ended 31 December 2024 is consistent with the financial statements
and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the
course of the audit, we did not identify any material misstatements in the Strategic Report and Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that
they give a true and fair view. The Directors are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group's and the
Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the
Company or to cease operations, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
57
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance
with laws and regulations related to the failure to comply with environmental regulations, health and safety
regulations and the relevant tax compliance regulations in the jurisdictions in which the Group operates, and
we considered the extent to which non-compliance might have a material effect on the financial statements.
We also considered those laws and regulations that have a direct impact on the financial statements such as
the Companies Act 2006. We evaluated management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries and management bias in accounting
estimates. The group engagement team shared this risk assessment with the component auditors so that they
could include appropriate audit procedures in response to such risks in their work.
Audit procedures performed by the group engagement team and/or component auditors included:
•
Inquiries of management and those charged with governance, including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud;
•
Understanding and evaluating controls designed to prevent and detect irregularities and fraud;
•
Assessing significant judgements and estimates, in particular those relating to the carrying value of
investments in, and loans to, subsidiary undertakings, and the disclosure of these items (and as outlined
further in the 'Key audit matters' section of this report).
•
Identifying and testing journal entries, using specific risk criteria, including journals with unusual account
combinations, journals posted by unexpected users, journals with no description or specific words
included in the description and year end and consolidation journals.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that are not closely related to events and transactions
reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly
using data auditing techniques. However, it typically involves selecting a limited number of items for testing,
rather than testing complete populations. We will often seek to target particular items for testing based on their
size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about
the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC's
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.
58
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
we have not obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the Company, or returns adequate for our audit
have not been received from branches not visited by us; or
•
certain disclosures of Directors' remuneration specified by law are not made; or
•
the Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Use of this report
This report, including the opinions, has been prepared for and only for the Company's members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where expressly agreed by our prior consent in
writing.
Filip Lyapov (Senior Statutory Auditor)
for and on behalf of Zenith Audit Ltd
Statutory Auditors
1st Floor, 18 Devonshire Row, London EC2M 4RH
12 June 2025
59
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Consolidated Income Statement
for the year ended 31 December 2024
2024
2023
Note
$000
$000
Revenue
4
44,928
62,194
Cost of sales
5
(16,693)
(23,222)
Gross profit
28,235
38,972
Administrative expenses
6
(6,190)
(6,953)
Other operating gains/(losses), (net)
9
7,061
3,517
Operating profit
29,106
35,536
Finance income
10
7
2,144
Finance costs
11
(663)
(2,705)
Net income from investments
1,176
-
Net impairment/(losses) on financial assets
789
(475)
Other gains/(losses), (net)
12
4
683
Profit before taxation
30,419
35,183
Income tax expense
13
(6,696)
(8,697)
Profit for the year
23,723
26,486
Earnings per share (cents)
Basic and diluted
15
7.4с
8.3c
The Notes set out below on pages 67 to 108 are an integral part of these consolidated financial
statements.
60
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2024
2024
2023
$000
$000
Profit for the year
23,723
26,486
Other comprehensive income/(expense):
Items that may be subsequently reclassified to profit or loss:
Equity – foreign currency translation
(14,479)
(4,844)
Items that will not be subsequently reclassified to profit or loss:
Re-measurements of post-employment benefit obligations
75
47
Total other comprehensive income/(expense)
(14,404)
(4,797)
Total comprehensive income for the year
9,319
21,689
Company Statement of Comprehensive Income
for the year ended 31 December 2024
Note
2024
2023
$000
$000
Profit/(loss) for the year
14
(12,940)
7,151
Total comprehensive income/(loss) for the year
(12,940)
7,151
The Notes set out below on pages 67 to 108 are an integral part of these consolidated financial statements.
61
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Consolidated Balance Sheet
as at 31 December 2024
2024
2023
Note
$000
$000
Assets
Non-current assets
Property, plant and equipment
16
72,083
79,277
Intangible assets
17
7,317
8,372
Right-of-use assets
18
633
192
Deferred tax asset
25
363
352
Prepayments for fixed assets
363
110
Non-current receivables
51
-
80,810
88,303
Current assets
Inventories
20
3,152
2,951
Trade and other receivables
21
7,648
15,585
Cash and cash equivalents
22
99,398
76,493
110,198
95,029
Total assets
191,008
183,332
Liabilities
Current liabilities
Trade and other payables
23
(3,286)
(6,012)
Lease liabilities
18
(343)
(38)
Corporation tax payable
(974)
(2,175)
(4,603)
(8,225)
Net current assets
105,595
86,804
Non-current liabilities
Provision for decommissioning
24
(8,276)
(7,305)
Lease liabilities
18
(492)
(245)
Defined benefit liability
(323)
(372)
Deferred tax liability
25
(5,796)
(4,976)
Other non-current liabilities
(78)
(88)
(14,965)
(12,986)
Total liabilities
(19,568)
(21,211)
Net assets
171,440
162,121
Equity
Called up share capital
26
28,115
28,115
Foreign exchange reserve
27
(161,028)
(146,549)
Merger reserve
27
(3,204)
(3,204)
Capital contributions reserve
27
7,477
7,477
Retained earnings
300,080
276,282
Total equity
171,440
162,121
The Notes set out below on pages 67 to 108 are an integral part of these consolidated financial statements.
The financial statements of Enwell Energy plc, company number 04462555, on pages 59 to 108 were approved by
the Board of Directors on 12 June 2025 and signed on its behalf by:
Bruce Burrows
Finance Director
62
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Consolidated Statement of Changes in Equity
for the year ended 31 December 2024
Called
up share
capital
Merger
reserve
Capital
contributions
reserve
Foreign
exchange
reserve*
Retained
earnings/(Accumu
lated losses)
Total equity
$000
$000
$000
$000
$000
$000
As at 1 January 2023
28,115
(3,204)
7,477
(141,705)
309,976
200,659
Profit for the year
-
-
-
-
26,486
26,486
Other comprehensive expense
- exchange differences
-
-
-
(4,844)
-
(4,844)
- re-measurements of post-
employment benefit obligations
-
-
-
-
47
47
Total comprehensive
income/(expense)
-
-
-
(4,844)
26,533
21,689
Dividends
-
-
-
-
(60,227)
(60,227)
As at 31 December 2023
28,115
(3,204)
7,477
(146,549)
276,282
162,121
Called
up share
capital
Merger
reserve
Capital
contributions
reserve
Foreign
exchange
reserve*
Retained
earnings/(Accum
ulated losses)
Total equity
$000
$000
$000
$000
$000
$000
As at 1 January 2024
28,115
(3,204)
7,477
(146,549)
276,282
162,121
Profit for the year
-
-
-
-
23,723
23,723
Other comprehensive income
- exchange differences
-
-
-
(14,479)
-
(14,479)
- re-measurements of post-
employment benefit obligations
-
-
-
-
75
75
Total comprehensive
income/(expense)
-
-
-
(14,479)
23,798
9,319
Dividends
-
-
-
-
-
-
As at 31 December 2024
28,115
(3,204)
7,477
(161,028)
300,080
171,440
* Predominantly as a result of exchange differences on non-monetary assets and liabilities where the subsidiaries’ functional currency is not the US
Dollar.
The Notes set out below on pages 67 to 108 are an integral part of these consolidated financial statements.
63
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Consolidated Cash Flow Statement
for the year ended 31 December 2024
2024
2023
Note
$000
$000
Operating activities
Cash generated from operations
28
33,039
62,947
Charitable donations
12
(18)
(17)
Income tax paid
(6,375)
(6,990)
Interest received
7,914
4,578
Net cash inflow from operating activities
34,560
60,518
Investing activities
Purchase of oil and gas development, production and other property,
plant and equipment
(3,324)
(10,179)
Purchase of oil and gas exploration and evaluation assets
(336)
(335)
Purchase of oil and gas development, production and other
intangible assets
(277)
(320)
Proceeds from sale of property, plant and equipment
35
7
Net cash outflow from investing activities
(3,902)
(10,827)
Financing activities
Payment of principal portion of lease liabilities
(436)
(406)
Dividend paid
-
(59,623)
Net cash outflow from financing activities
(436)
(60,029)
Net increase in cash and cash equivalents
30,222
(10,338)
Cash and cash equivalents at the beginning of the year
76,493
88,652
ECL* of cash and cash equivalents
(522)
(494)
Effect of foreign exchange rate changes
(6,795)
(1,327)
Cash and cash equivalents at the end of the year
22
99,398
76,493
*ECL – Expected credit losses
The Notes set out below on pages 67 to 108 are an integral part of these consolidated financial statements.
64
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Company Balance Sheet
as at 31 December 2024
2024
2023
Note
$000
$000
Assets
Non-current assets
Intangible assets
30
36
Investments
19
29,632
30,704
Loans to subsidiary undertakings
19
30,170
39,206
59,832
69,946
Current assets
Trade and other receivables
21
1,248
1,369
Cash and cash equivalents
22
16,369
20,695
17,617
22,064
Total assets
77,449
92,010
Liabilities
Non-current liabilities
Other non-current liabilities
-
-
Current liabilities
Trade and other payables
(550)
(2,171)
(550)
(2,171)
Net current assets
17,067
19,893
Total liabilities
(550)
(2,171)
Net assets
76,899
89,839
Equity
Called up share capital
26
28,115
28,115
Retained earnings as at 1 January
61,724
114,800
-
Profit/(loss) for the year and total comprehensive income
14
(12,940)
7,151
-
Dividend payment
-
(60,227)
Retained earnings as at 31 December
48,784
61,724
Total equity
76,899
89,839
The Notes set out below on pages 67 to 108 are an integral part of these consolidated financial statements.
The financial statements of Enwell Energy plc, company number 04462555, on pages 59 to 108 were
approved by the Board of Directors on 12 June 2025 and signed on its behalf by:
Bruce Burrows
Finance Director
65
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Company Statement of Changes in Equity
for the year ended 31 December 2024
Called up
share
capital
Retained
earnings
Total equity
$000
$000
$000
As at 1 January 2023
28,115
114,800
142,915
Profit for the year and total
comprehensive income
-
7,151
7,151
Dividend payment
-
(60,227)
(60,227)
As at 31 December 2023
28,115
61,724
89,839
Called up
share
capital
Retained
earnings
Total equity
$000
$000
$000
As at 1 January 2024
28,115
61,724
89,839
Profit for the year and total
comprehensive income
-
(12,940)
(12,940)
As at 31 December 2024
28,115
48,784
76,899
The Notes set out below on pages 67 to 108 are an integral part of these consolidated financial statements.
66
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Company Cash Flow Statement
for the year ended 31 December 2024
Note
2024
2023
$000
$000
Operating activities
Cash used in operations
28
(4,928)
(2,975)
Taxation paid
-
-
Interest received
920
1,906
Net cash from/(used in) operating activities
(4,008)
(1,069)
Investing activities
Purchase of subsidiaries
-
(100)
Debt repayment
(307)
-
Net cash from/(used in) investing activities
(307)
(100)
Financing acitvities
Dividends paid
-
(59,623)
Net cash (used in)/provided by financing activities
-
(59,623)
Net increase in cash and cash equivalents
(4,315)
(60,792)
Cash and cash equivalents at beginning of year
20,695
81,541
Effect of foreign exchange rate changes
(24)
(54)
Effect of ECL changes
13
-
Cash and cash equivalents at end of year
22
16,369
20,695
The Notes set out below on pages 67 to 108 are an integral part of these consolidated financial statements.
67
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Notes forming part of the financial statements
1.
General Information and Operational Environment
Enwell Energy plc (the “Company”) and its subsidiaries (the “Group”) is a gas, condensate, oil and LPG
production group.
The Company is a public limited company incorporated in England and Wales under the Companies Act
2006, whose shares are quoted on the AIM Market of London Stock Exchange plc. The Company’s
registered office is at 84 Brook Street, London W1K 5EH, United Kingdom and its registered number is
4462555. The principal activities of the Group and the nature of the Group’s operations are set out above.
As at 31 December 2023 and 2024, the Company’s immediate parent company was Smart Energy (CY)
Limited, which was 100% owned by Smart Holding (Cyprus) Limited, which was 100% owned by Proteas
Trustees Ltd as trustee of the STEP Trust, and Proteas Trustee Services Ltd, Afroditi Loukaidou, Elena
Iona and Maria Sokratous as trustees of the SMART Trust. Accordingly, the Company was ultimately
controlled by Proteas Trustees Ltd as trustee of the STEP Trust, and Proteas Trustee Services Ltd, Afroditi
Loukaidou, Elena Iona and Maria Sokratous as trustees of the SMART Trust.
The Group’s gas, condensate, oil and LPG extraction and production facilities are located in Ukraine.
Impact of the ongoing war in Ukraine
On 24 February 2022, Russia commenced a military invasion of Ukraine, and since then there has been
an ongoing war in Ukraine. Shortly after the invasion, the Ukrainian Government imposed martial law, and
the corresponding introduction of related temporary restrictions that impact, amongst other areas, the
economic environment and business operations in Ukraine. The war has caused significant economic and
social challenges in Ukraine, which has led to a deterioration of Ukrainian State finances, volatility of
financial markets, illiquidity on capital markets, higher inflation and a depreciation of the national currency
against major foreign currencies.
During 2022, the National Bank of Ukraine (“NBU”) took a number of measures to protect the Ukrainian
economy, including significantly increasing its key policy interest rate, introducing temporary restrictions on
foreign currency trades and limiting cross-border payments for non-critical imports and repayment of debt
to foreign creditors, apart from international institutions. In addition, the Ukrainian Hryvnia exchange rate
with the US Dollar was effectively fixed on the foreign exchange market to ensure the stable operation of
Ukraine’s financial system.
These measures proved effective, and during 2023, the NBU lifted a number of the currency restrictions
and relaxed the measures that related, inter alia, to foreign currency sale limits for banks and non-banking
financial institutions. Furthermore, during 2023 and 2024, the NBU gradually decreased its key policy rate,
and this now stands at 15.5%. The NBU is now following an interest rate policy consistent with inflation
targets. The inflation rate in Ukraine for 2024 was 12% (2023: 5%) according to the statistics published by
the State Statistics Service of Ukraine.
In October 2023, the NBU returned to a managed floating exchange rate for the Ukrainian Hryvnia, and as
of 31 December 2024, the Ukrainian Hryvnia exchange rate with the US Dollar was UAH42.04/$1.00
(UAH37.98/$1.00 as at 31 December 2023).
During 2024, Ukrainian GDP increased by 2.9% compared with a 4.9% increase in 2023.
The nature of the situation in Ukraine and the unpredictability of the outcome means it is impracticable to
assess the full impact of the war on the economic environment.
Overall, the final resolution and the ongoing effects of the war and political and economic situation in
Ukraine are difficult to predict, but they may have further severe effects on the Ukrainian economy and the
Group’s business.
68
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
As at 2 June 2025, the official NBU exchange rate of the Ukrainian Hryvnia against the US Dollar was
UAH41.5/$1.00, compared with UAH42.0/$1.00 as at 31 December 2024.
Further details of risks relating to Ukraine can be found within the Principal Risks section of the Strategic
Report.
2.
Accounting Policies
The principal accounting policies applied in the preparation of these consolidated financial statements are
set out below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
Basis of Preparation
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and
became UK-adopted International Accounting Standards, with future changes being subject to
endorsement by the UK Endorsement Board. The Group and Company transitioned to UK-adopted
International Accounting Standards on 1 January 2021. This change constitutes a change in accounting
framework. However, there is no impact on recognition, measurement or disclosure in the period reported
as a result of the change in framework. The consolidated financial statements of the Group and the financial
statements of the Company have been prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
These consolidated financial statements have been prepared in accordance with UK-adopted International
Accounting Standards under the historical cost convention, as modified by the initial recognition of financial
instruments based on fair value, and by the revaluation of financial instruments categorised at fair value
through profit or loss (“FVTPL”) and at fair value through other comprehensive income (“FVOCI”). The
principal accounting policies applied in the preparation of these consolidated financial statements are set
out below. Apart from the accounting policy changes effective from 1 January 2022 these policies have
been consistently applied to all the periods presented, unless otherwise stated.
The preparation of financial statements in conformity with UK-adopted International Accounting Standards
requires the use of certain critical accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in Note 3. The consolidated financial statements are presented in
thousands of US Dollars.
Going Concern
The Group’s business activities, together with the factors likely to affect its future operations, performance
and position are set out in the Chairman’s Statement, Chief Executive’s Statement and Finance Review.
The financial position of the Group, its cash flows and liquidity position are set out in these consolidated
financial statements.
On 24 February 2022, Russia commenced a military invasion of Ukraine, and since then there has been
an ongoing war between Russia and Ukraine. Immediately after the commencement of the war, the
Ukrainian Government imposed martial law and introduced a number of related temporary restrictions that
impacted the economic environment and business operations in Ukraine. While a number of restrictions
remain in place, improvements in the economic environment have led the Ukrainian Government to relax
a number of the restrictions and stabilise the economic situation in Ukraine.
The production assets of the Group are located in the central and eastern part of the country (Poltava and
Kharkiv regions) which are controlled by the Ukrainian Government. As of the date of approval of these
financial statements, no assets of the Group have been damaged. However, the licences relating to the
Group’s MEX-GOL and SV assets in the Poltava region and VAS asset in the Kharkiv region are suspended
after the State Geologic and Subsoil Survey of Ukraine issued orders on 15 November 2024 for the
suspension of the MEX-GOL, SV and VAS production licences for a period of ten years effective from 8
69
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
October 2024, and consequently all field and production operations on these licences has ceased. No
military activities have occurred at the Group’s field locations. The Gas Transmission System Operator of
Ukraine has maintained complete operational and technological control over the operations of the Ukrainian
Gas Transmission System. However, as of the date of approval of these financial statements, the war and
the regulatory actions of the Ukrainian authorities has had, and continues to have, a material impact on the
production and sales levels of the business and execution of the Group’s 2025 budget.
The Group has no debt and funds its operations from its own cash resources. Cash and cash equivalents
were $102.1 million as at 2 June 2025. The Directors maintain a significant level of flexibility to modify the
Group’s development plans as may be required to preserve cash resources for liquidity management.
Absent the potential impact of the war in Ukraine, the Directors are satisfied that the Group and the
Company are a going concern and will continue their operations for the foreseeable future.
In assessing the impact of the war and the regulatory actions of the Ukrainian authorities on the ability of
the Group and the Company to continue as a going concern, the Directors have analysed a number of
possible scenarios of economic and military developments and the impact on the expected cash flows of
the Group and Company for 2025 and 2026. This includes considering a possible worst case scenario in
which the Group has zero production as a result of possible future military conflict and regulatory actions
dictating field operations being completely shut-in, and all other non-production related costs being
maintained at current levels with no reduction or mitigating actions as would otherwise be possible. Even
in this worst-case scenario, the Directors are satisfied that the Group and the Company have sufficient
liquid resources to be able to meet their liabilities as they fall due and to be able to continue as a going
concern for the foreseeable future.
The corporate strategy for the near term is to:
•
continue work for the development of the SC exploration licence area, while preserving existing cash
resources, and moderating such development plans to reduce cash spend exposure whilst the war
and regulatory, operational and political uncertainty continues;
•
vigorously pursue legal initiatives to protect the Group’s assets, restore all licences and production,
and seek compensation for losses incurred to date and as may be incurred in the future; and
•
tightly manage costs to ensure cash resources are maintained at levels capable of sustaining the
business through the continuing uncertainty.
In respect of the Group’s operations, staff and assets in Ukraine, the potential short and long-term impact
of the future development of the war is inherently uncertain. Accordingly, this creates a material uncertainty
related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern because of the potential impact on its ability to continue its operations for the foreseeable future
and realise its assets in the normal course of business. The financial statements do not include the
adjustments that would result if the Group were unable to continue as a going concern.
The Company is a UK-based investment holding company. The Company had cash and cash equivalents
of $17.0 million as at 2 June 2025, all of which are held outside Ukraine, in US Dollars, Pounds Sterling
and Euros. The Directors are satisfied that the Company is a going concern and will be able to continue its
operations for the foreseeable future, and there is no material uncertainty in respect of its ability to do so.
New and revised standards adopted by the Group
The Group has adopted the following new and revised standards for the first time, effective for reporting
periods beginning on or after 1 January 2024:
Amendments to IAS 1 Liabilities with Covenants
The amendments clarify the requirements for classifying liabilities in financial statements if the
implementation of covenants is related to events after the reporting date. Now, liabilities related to
covenants are classified as non-current if all contractual terms are met at the reporting date, or if the creditor
provides a grace period to remedy covenant violations that lasts at least 12 months after the reporting date.
70
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
This allows entities to avoid incorrect classification of liabilities that are not actually required to be repaid
immediately.
The amendments require retrospective application for all periods presented, if practicable.
Since the Group has no liabilities with covenants, the Group's accounting policies have not changed, no
potential impacts on future periods are expected, the amendments did not affect any items in the financial
statements, and there were no restatements for prior periods.
Amendments to IFRS 16 - Sale and Leaseback Liabilities
The amendments clarify the requirements for measuring lease liabilities in sale and leaseback cases. In
particular, the amendments require lease payments to be determined in such a way that the amount of
profit recognised corresponds only to those rights that have been transferred to the lessor. This is aimed to
avoid misinterpretation in the event of changes in future lease payments, especially if they include variable
payments that are not index or rate dependent. The amendments allow entities to increase transparency in
financial reporting and enhance compliance with the economic substance of transactions.
The transitional provisions require retrospective application to all periods presented.
Since these amendments relate to transactions that are absent in the Group’s activities, the Group's
accounting policies have not changed, no potential impacts on future periods are expected, the
amendments did not affect any items in the financial statements, and there were no restatements for prior
periods.
Amendments to IAS 7 and IFRS 7 - Supplier Financing Arrangements
The amendments clarify disclosure requirements for supplier financing arrangements that allow companies
to transfer their liabilities to suppliers to financial institutions. The amendments are aimed at improving the
transparency of cash flow reporting, liability classification, and liquidity risks. Disclosures are required to
include the terms of such arrangements, the range of payment periods, the amount of the liabilities, and
the impact on financial indicators.
The amendments require retrospective application to all periods presented.
Since these amendments relate the specific transactions that are absent in the Group’s activities, the
Group's accounting policies have not changed, no potential impacts on future periods are expected, the
amendments did not affect any items in the financial statements, and there were no restatements for the
prior periods.
New and revised IFRSs have been issued but have not yet entered into force
In accordance with the requirements of IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors, the Group has considered all new and revised standards that have been issued but are not yet
effective at the date of preparation of these financial statements. The list of such standards and
amendments includes:
Standards and Interpretations
Effective date
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates
- Lack of Exchangeability
1 January 2025
Renewable Energy Contracts (Amendments to IFRS 9 and IFRS 7)
1 January 2026
Annual Improvements to IFRS – Volume 11
1 January 2026
Amendments to the classification and measurement of financial instruments
(amendments to IFRS 9 and IFRS 7)
1 January 2026
These new standards and interpretations are not expected to significantly affect the Group’s consolidated
financial statements.
Exchange differences on intra-group balances with foreign operations
The Group has certain inter-company monetary balances of which the Company is the beneficial owner.
These monetary balances are payable by a subsidiary that is a foreign operation and are eliminated on
consolidation.
71
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
In the consolidated financial statements, exchange differences arising on such payables because the
transaction currency differs from the subsidiary’s functional currency are recognised initially in other
comprehensive income if the settlement of such payables is continuously deferred and is neither planned
nor likely to occur in the foreseeable future.
In such cases, the respective receivables of the Company are regarded as an extension of the Company’s
net investment in that foreign operation, and the cumulative amount of the abovementioned exchange
differences recognised in other comprehensive income is carried forward within the foreign exchange
reserve in equity and is reclassified to profit or loss only upon disposal of the foreign operation.
When the subsidiary that is a foreign operation settles its quasi-equity liability due to the Company, but the
Company continues to possess the same percentage of the subsidiary, i.e. there has been no change in
its proportionate ownership interest, such settlement is not regarded as a disposal or a partial disposal, and
therefore cumulative exchange differences are not reclassified.
The designation of inter-company monetary balances as part of the net investment in a foreign operation
is re-assessed when management’s expectations and intentions on settlement change due to a change in
circumstances.
Where, because of a change in circumstances, a receivable balance, or part thereof, previously designated
as a net investment into a foreign operation is intended to be settled, the receivable is de-designated and
is no longer regarded as part of the net investment.
In such cases, the exchange differences arising on the subsidiary’s payable following de-designation are
recognised within finance costs / income in profit or loss, similar to foreign exchange differences arising
from financing.
Foreign exchange gains and losses not related to intra-group balances are recognised on a net basis as
other gains or losses.
Basis of Consolidation
The consolidated financial statements incorporate the financial information of the Company and entities
controlled by the Company (and its subsidiaries) made up to 31 December each year.
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred
to the former owners of the acquiree and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. The Group recognises any
non-controlling interest in the acquiree on an acquisition-by-acquisition basis at the non-controlling
interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains
or losses arising from such re-measurement are recognised in profit or loss.
72
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset
or liability is recognised in accordance with IFRS 9 in profit or loss.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have
been adjusted to conform with the Group’s accounting policies.
Segment reporting
The Group’s only class of business activity is oil and gas exploration, development and production. The
Group’s primary operations are located in Ukraine, with its head office in the United Kingdom.
The geographical segments are the basis on which the Group reports its segment information to
management. Operating segments are reported in a manner consistent with the internal reporting provided
to the Board of Directors.
Commercial Reserves
Proved and probable oil and gas reserves are estimated quantities of commercially producible
hydrocarbons which the existing geological, geophysical and engineering data show to be recoverable in
future years from known reservoirs. Proved reserves are those quantities of petroleum that, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to be commercially
recoverable from known reservoirs and under defined technical and commercial conditions. Probable
reserves are those additional reserves which analysis of geoscience and engineering data indicate are less
likely to be recovered than proved reserves but more certain to be recovered than possible reserves.
The proved and probable reserves conform to the definition approved by the Petroleum Resources
Management System.
Oil and Gas Exploration/Evaluation and Development/Production Assets
The Group applies the successful efforts method of accounting for oil and gas assets, having regard to the
requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources.
Exploration costs are incurred to discover hydrocarbon resources. Evaluation costs are incurred to assess
the technical feasibility and commercial viability of the resources found. Exploration, as defined in IFRS 6
Exploration and evaluation of mineral resources, starts when the legal rights to explore have been obtained.
Expenditure incurred before obtaining the legal right to explore is generally expensed; an exception to this
would be separately acquired intangible assets such as payment for an option to obtain legal rights.
Expenditures incurred in the exploration activities are expensed unless they meet the definition of an asset.
The Group recognises an asset when it is probable that economic benefits will flow to the Group as a result
of the expenditure. The economic benefits might be available through commercial exploitation of
hydrocarbon reserves or sales of exploration findings or further development rights. Exploration and
evaluation (“E&E”) assets are recognised as either property, plant and equipment or intangible assets,
according to their nature, in single field cost centres.
The capitalisation point is the earlier of:
(a)
the point at which the fair value less costs to sell the property can be reliably determined as being
higher than the total of the expenses incurred and costs already capitalised (such as licence
acquisition costs); and
(b)
an assessment of the property demonstrates that commercially viable reserves are present and
hence there are probable future economic benefits from the continued development and production
of the resource.
E&E assets are reclassified from Exploration and Evaluation when evaluation procedures have been
completed. E&E assets that are not commercially viable are written down. E&E assets for which
commercially viable reserves have been identified are reclassified to Development and Production assets.
E&E assets are tested for impairment immediately prior to reclassification out of E&E.
73
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Once an E&E asset has been reclassified from E&E, it is subject to the normal IFRS requirements. This
includes impairment testing at the cash-generating unit (“CGU”) level and depreciation.
Abandonment and Retirement of Individual Items of Property, Plant and Equipment
Normally, no gains or losses shall be recognised if only an individual item of equipment is abandoned or
retired or if only a single lease or other part of a group of proved properties constituting the amortisation
base is abandoned or retired as long as the remainder of the property or group of properties constituting
the amortisation base continues to produce oil or gas. Instead, the asset being abandoned or retired shall
be deemed to be fully amortised, and its costs shall be charged to accumulated depreciation, depletion or
amortisation. When the last well on an individual property (if that is the amortisation base) or group of
properties (if amortisation is determined on the basis of an aggregation of properties with a common
geological structure) ceases to produce and the entire property or group of properties is abandoned, a gain
or loss shall be recognised. Occasionally, the partial abandonment or retirement of a proved property or
group of proved properties or the abandonment or retirement of wells or related equipment or facilities may
result from a catastrophic event or other major abnormality. In those cases, a loss shall be recognised at
the time of abandonment or retirement.
Intangible Assets other than Oil and Gas Assets
Intangible assets other than oil and gas assets are stated at cost less accumulated amortisation and any
provision for impairment. These assets represent exploration licences. Amortisation is charged so as to
write off the cost, less estimated residual value on a straight-line basis of 20-25% per annum.
Depreciation, Depletion and Amortisation
All expenditure carried within each field is amortised from the commencement of commercial production on
a unit of production basis, which is the ratio of gas production in the period to the estimated quantities of
commercial reserves at the end of the period plus the production in the period, generally on a field by field
basis. In certain circumstances, fields within a single development area may be combined for depletion
purposes. Costs used in the unit of production calculation comprise the net book value of capitalised costs
plus the estimated future field development costs necessary to bring the reserves into production.
Impairment
At each balance sheet date, the Group reviews the carrying amount of oil and gas development and
production assets to determine whether there is any indication that those assets have suffered an
impairment loss. This includes exploration and appraisal costs capitalised which are assessed for
impairment in accordance with IFRS 6. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss.
For oil and gas development and production assets, the recoverable amount is the greater of fair value less
costs to dispose and value in use. In assessing value in use, the estimated future cash flows are discounted
to their present value using an expected weighted average cost of capital. If the recoverable amount of an
asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. Impairment losses are recognised as an expense immediately. The valuation method
used for determination of fair value less cost of disposal is based on unobservable market data, which is
within Level 3 of the fair value hierarchy.
Should an impairment loss subsequently reverse, the carrying amount of the asset 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
in prior years. A reversal of an impairment loss is recognised as income immediately.
Decommissioning Provision
Where a material liability for the removal of existing production facilities and site restoration at the end of
the productive life of a field exists, a provision for decommissioning is recognised. The amount recognised
is the present value of estimated future expenditure determined in accordance with local conditions and
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
requirements. The cost of the relevant property, plant and equipment is increased with an amount
equivalent to the provision and depreciated on a unit of production basis. Changes in estimates are
recognised prospectively, with corresponding adjustments to the provision and the associated fixed asset.
The unwinding of the discount on the decommissioning provision is included within finance costs.
Property, Plant and Equipment other than Oil and Gas Assets
Property, plant and equipment other than oil and gas assets (included in Other fixed assets in Note 16 are
stated at cost less accumulated depreciation and any provision for impairment. Depreciation is charged so
as to write off the cost of assets on a straight-line basis over their useful lives as follows:
Useful lives in years
Buildings and constructions
10 to 20 years
Machinery and equipment
2 to 5 years
Vehicles
5 years
Office and other equipment
4 to 12 years
Spare parts and equipment purchased with the intention to be used in future capital investment projects
are recognised as oil and gas development and production assets within property, plant and equipment.
Right-of-use assets
The Group leases various offices, equipment, wells and land. Contracts may contain both lease and non-
lease components. The Group allocates the consideration in the contract to the lease and non-lease
components based on their relative stand-alone prices.
Assets arising from a lease are initially measured on a present value basis.
Right-of-use assets are measured at cost comprising the following:
●
the amount of the initial measurement of lease liability,
●
any lease payments made at or before the commencement date less any lease incentives received,
●
any initial direct costs, and
●
costs to restore the asset to the conditions required by lease agreements.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term
on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use
asset is depreciated over the underlying assets’ useful lives. Depreciation on the items of the right-of-use
assets is calculated using the straight-line method over their estimated useful lives as follows:
Useful lives in years
Land
40 to 50 years
Wells
10 to 20 years
Properties:
Buildings and constructions
10 to 20 years
Machinery and equipment
2 to 5 years
Vehicles
5 years
Office and other equipment
4 to 12 years
Inventories
Inventories typically consist of materials, spare parts and hydrocarbons, and are stated at the lower of cost
and net realisable value. Cost of finished goods is determined on the weighted average bases. Cost of
other than finished goods inventory is determined on the first in first out basis. Net realisable value
represents the estimated selling price less all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
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Revenue Recognition
Revenue is income arising in the course of the Group’s ordinary activities. Revenue is recognised by the
amount of the transaction price. Transaction price is the amount of consideration to which the Group
expects to be entitled in exchange for transferring control over promised goods or services to a customer,
excluding the amounts collected on behalf of third parties.
Revenue is recognised net of indirect taxes and excise duties.
Sales of gas, condensate, oil and LPG are recognised when control of the good has transferred, being
when the goods are delivered to the customer, the customer has full discretion over the goods, and there
is no unfulfilled obligation that could affect the customer’s acceptance of the goods. Delivery occurs when
the goods have been shipped to the specific location, the risks of obsolescence and loss have been
transferred to the customer, and either the customer has accepted the goods in accordance with the
contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for
acceptance have been satisfied.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration
is unconditional because only the passage of time is required before the payment is due.
The Group normally uses standardised contracts for the sale of gas, condensate, oil and LPG, which define
the point of control transfer. The price and quantity of each sale transaction are indicated in the
specifications to the sales contracts.
The control over gas is transferred to a customer when the respective act of acceptance is signed by the
parties to a contract upon delivery of gas to the point of sale specified in the contract, normally being a
certain point in the Ukrainian gas transportation system. Acts of acceptance of gas are signed and the
respective revenues are recognised on a monthly basis.
The control over condensate, oil and LPG is transferred to a customer when the respective waybill is signed
by the parties to a contract upon shipment of goods at the point of sale specified in the contract, which is
normally the Group’s production site.
Foreign Currencies
The Group’s consolidated financial statements and those of the Company are presented in US Dollars. The
functional currency of the subsidiaries which operate in Ukraine is Ukrainian Hryvnia. The remaining entities
have US Dollars as their functional currency.
The functional currency of individual companies is determined by the primary economic environment in
which the entity operates, normally the one in which it primarily generates and expends cash. In preparing
the financial statements of the individual companies, transactions in currencies other than the entity’s
functional currency (“foreign currencies”) are recorded at the rates of exchange prevailing on the dates of
the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the balance sheet date. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income
Statement. Non-monetary assets and liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair value was determined. Non-
monetary items which are measured in terms of historical cost in a foreign currency are not retranslated.
Gains and losses arising on retranslation are included in net profit or loss for the period, except for exchange
differences arising on balances which are considered long term investments where the changes in fair value
are recognised directly in other comprehensive income.
On consolidation, the assets and liabilities of the Group’s subsidiaries which do not use US Dollars as their
functional currency are translated into US Dollars as follows:
(a)
assets and liabilities for each Balance Sheet presented are translated at the closing rate at the date
of that Balance Sheet;
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
(b)
income and expenses for each Income Statement are translated at average monthly exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the rate on the dates
of the transactions); and
(c)
all resulting exchange differences are recognised in other comprehensive income.
The principal rates of exchange used for translating foreign currency balances as at 31 December 2024
were $1:UAH42.04 (2023: $1: UAH37.98), $1:£0.798 (2023: $1:£ 0.779), $1:€0.963 (2023: $1:€ 0.886),
and the average rates for the year were $1:UAH40.16 (2023: $1:UAH36.58), $1:£0.783 (2023: $1:£ 0.804),
$1:€0.925 (2023: $1:€ 0.923).
None of the Group’s operations are considered to use the currency of a hyperinflationary economy, however
this is kept under review.
Pensions
The Group contributes to a local government pension scheme in Ukraine and defined benefit plans. The
Group has no further payment obligations towards the local government pension scheme once the
contributions have been paid.
Defined benefit plans define an amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and compensation.
The Group companies participate in a mandatory Ukrainian State-defined retirement benefit plan, which
provides for early pension benefits for employees working in certain workplaces with hazardous and
unhealthy working conditions. The Group also provides lump sum benefits upon retirement subject to
certain conditions. The early pension benefit (in the form of a monthly annuity) is payable by employers
only until the employee has reached the statutory retirement age. The pension scheme is based on a benefit
formula which depends on each individual member’s average salary, his/her total length of past service
and total length of past service at specific types of workplaces (“list II” category).
The liability recognised in the Balance Sheet in respect of defined benefit pension plans is the present value
of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The
defined benefit obligation is calculated annually by independent actuaries using the projected unit credit
method. The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that are denominated in the
currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of
the related pension obligation. Since Ukraine has no deep market in such bonds, the market rates on
government bonds are used.
The current service cost of the defined benefit plan, recognised in the Income Statement within the Cost of
Sales in employee benefit expense, except where included in the cost of an asset, reflects the increase in
the defined benefit obligation resulting from employee service in the current year, benefit changes
curtailments and settlements. Past-service costs are recognised immediately in the Income Statement.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Income
Statement within the Cost of Sales.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income in the period in which they arise.
Taxation
The tax expense represents the sum of the current tax and deferred tax.
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Current tax, including UK corporation and overseas tax, is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities
in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in
subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax is calculated at the tax rates which are expected to apply in the period when the liability is
settled or the asset is realised. Deferred tax is charged or credited in the Income Statement, except when
it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in
equity.
Other taxes which include recoverable value added tax, excise tax and custom duties represent the
amounts receivable or payable to local tax authorities in the countries where the Group operates.
Value added tax
Output value added tax related to sales is payable to tax authorities on the earlier of (a) collection of
receivables from customers or (b) delivery of goods or services to customers. Input VAT is generally
recoverable against output VAT upon receipt of the VAT invoice. The tax authorities permit the settlement
of VAT on a net basis. VAT related to sales and purchases is recognised in the consolidated statement of
financial position on a gross basis for different entities of the Group and disclosed separately as an asset
and a liability. Where provision has been made for expected credit losses (“ECL”) of receivables, the
impairment loss is recorded for the gross amount of the debtor, including VAT.
Financial Instruments
Financial instruments - key measurement terms. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The best evidence of fair value is the price in an active market. An active market is one in which
transactions for the asset or liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis.
Fair value of financial instruments traded in an active market is measured as the product of the quoted price
for the individual asset or liability and the number of instruments held by the entity. This is the case even if
a market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to
sell the position in a single transaction might affect the quoted price.
A portfolio of financial derivatives or other financial assets and liabilities that are not traded in an active
market is measured at the fair value of a group of financial assets and financial liabilities on the basis of the
price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or paid
to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between
market participants at the measurement date. This is applicable for assets carried at fair value on a recurring
basis if the Group: (a) manages the group of financial assets and financial liabilities on the basis of the
Group’s net exposure to a particular market risk (or risks) or to the credit risk of a particular counterparty in
accordance with the Group’s documented risk management or investment strategy; (b) it provides
information on that basis about the group of assets and liabilities to the Group’s key management
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
personnel; and (c) the market risks, including duration of the Group’s exposure to a particular market risk
(or risks) arising from the financial assets and financial liabilities are substantially the same.
Valuation techniques such as discounted cash flow models or models based on recent arm’s length
transactions or consideration of financial data of the investees are used to measure fair value of certain
financial instruments for which external market pricing information is not available. Fair value
measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements
at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements
are valuations techniques with all material inputs observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not
based on solely observable market data (that is, the measurement requires significant unobservable
inputs).
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of
a financial instrument. An incremental cost is one that would not have been incurred if the transaction had
not taken place. Transaction costs include fees and commissions paid to agents (including employees
acting as selling agents), advisers, brokers and dealers, levies by regulatory agencies and securities
exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts,
financing costs or internal administrative or holding costs.
Fair value is the amount at which the financial instrument was recognised at initial recognition, while
amortised cost (“AC”) is the amount at which the financial instrument was subsequently measured after the
initial recognition less any principal repayments, plus accrued interest, and for financial assets less any
allowance for ECL. Accrued interest includes amortisation of transaction costs deferred at initial recognition
and of any premium or discount to the maturity amount using the effective interest method. Accrued interest
income and accrued interest expense, including both accrued coupon and amortised discount or premium
(including fees deferred at origination, if any), are not presented separately and are included in the carrying
values of the related items in the consolidated statement of financial position.
The effective interest method is a method of allocating interest income or interest expense over the relevant
period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts
(excluding future credit losses) through the expected life of the financial instrument or a shorter period, if
appropriate, to the gross carrying amount of the financial instrument. The effective interest rate discounts
cash flows of variable interest instruments to the next interest repricing date, except for the premium or
discount which reflects the credit spread over the floating rate specified in the instrument, or other variables
that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life
of the instrument. The present value calculation includes all fees paid or received between parties to the
contract that are an integral part of the effective interest rate. For assets that are purchased or originated
credit impaired (“POCI”) at initial recognition, the effective interest rate is adjusted for credit risk, i.e. it is
calculated based on the expected cash flows on initial recognition instead of contractual payments.
Financial instruments – initial recognition. Financial instruments at fair value through profit or loss (“FVTPL”)
are initially recorded at fair value. All other financial instruments are initially recorded at fair value adjusted
for transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or
loss on initial recognition is only recorded if there is a difference between fair value and transaction price
which can be evidenced by other observable current market transactions in the same instrument or by a
valuation technique whose inputs include only data from observable markets. After the initial recognition,
an ECL allowance is recognised for financial assets measured at AC and investments in debt instruments
measured at fair value through other comprehensive income (“FVOCI”), resulting in an immediate
accounting loss.
All purchases and sales of financial assets that require delivery within the time frame established by
regulation or market convention (“regular way” purchases and sales) are recorded at trade date, which is
the date on which the Group commits to deliver a financial asset. All other purchases are recognised when
the entity becomes a party to the contractual provisions of the instrument.
Financial assets – classification and subsequent measurement – measurement categories. The Group
classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The
classification and subsequent measurement of debt financial assets depends on: (i) the Group’s business
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. The
Group’s financial assets include cash and cash equivalents, trade and other receivables, loans to subsidiary
undertakings, all of which are classified as AC in accordance with IFRS 9.
Financial assets - classification and subsequent measurement – business model. The business model
reflects how the Group manages the assets in order to generate cash flows – whether the Group’s objective
is: (i) solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”),
or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to
collect contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are
classified as part of “other” business model and measured at FVTPL.
Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence
about the activities that the Group undertakes to achieve the objective set out for the portfolio available at
the date of the assessment. Factors considered by the Group in determining the business model include
past experience on how the cash flows for the respective assets were collected.
The Group’s business model for financial assets is to collect the contractual cash flows from the assets
(“hold to collect contractual cash flows”).
Financial assets - classification and subsequent measurement - cash flow characteristics. Where the
business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell,
the Group assesses whether the cash flows represent solely payments of principal and interest (“SPPI”).
Financial assets with embedded derivatives are considered in their entirety when determining whether their
cash flows are consistent with the SPPI feature. In making this assessment, the Group considers whether
the contractual cash flows are consistent with a basic lending arrangement, i.e. interest includes only
consideration for credit risk, time value of money, other basic lending risks and profit margin.
Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending
arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed
on initial recognition of an asset and it is not subsequently reassessed.
Financial assets - reclassification. Financial instruments are reclassified only when the business model for
managing the portfolio as a whole changes. The reclassification has a prospective effect and takes place
from the beginning of the first reporting period that follows after the change in the business model. The
Group did not change its business model during the current and comparative period and did not make any
reclassifications.
Financial assets impairment - credit loss allowance for ECL. The Group assesses, on a forward-looking
basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising for
contractual assets. The Group measures ECL and recognises Net impairment losses on financial and
contractual assets at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability
weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money
and (iii) all reasonable and supportable information that is available without undue cost and effort at the
end of each reporting period about past events, current conditions and forecasts of future conditions.
Debt instruments measured at AC and contractual assets are presented in the consolidated statement of
financial position net of the allowance for ECL. For loan commitments and financial guarantees, a separate
provision for ECL is recognised as a liability in the consolidated statement of financial position.
The Group applies a simplified approach for impairment of cash and cash equivalents, other short-term
investments and trade and other receivables, by recognising lifetime expected credit losses based on past
default experience and credit profiles, adjusted as appropriate for current observable data. For other
financial assets the Group applies a three stage model for impairment, based on changes in credit quality
since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified
in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of
lifetime ECL that results from default events possible within the next 12 months or until contractual maturity,
if shorter (“12 Months ECL”). If the Group identifies a significant increase in credit risk (“SICR”) since initial
recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis,
that is, up until contractual maturity but considering expected prepayments, if any (“Lifetime ECL”). If the
Group determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL
is measured as a Lifetime ECL. For financial assets that are purchased or originated credit-impaired (“POCI
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Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Assets”), the ECL is always measured as a Lifetime ECL.
Financial assets - write-off. Financial assets are written-off, in whole or in part, when the Group has
exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of
recovery. The write-off represents a derecognition event. The Group may write-off financial assets that are
still subject to enforcement activity when the Group seeks to recover amounts that are contractually due,
however, there is no reasonable expectation of recovery.
Financial assets - derecognition. The Group derecognises financial assets when (a) the assets are
redeemed or the rights to cash flows from the assets otherwise expire or (b) the Group has transferred the
rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement
whilst (i) also transferring substantially all the risks and rewards of ownership of the assets or (ii) neither
transferring nor retaining substantially all the risks and rewards of ownership but not retaining control.
Financial assets - modification. If the modified terms are substantially different, the rights to cash flows from
the original asset expire and the Company derecognises the original financial asset and recognises a new
asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for
subsequent impairment calculation purposes, including determining whether a SICR has occurred. Any
difference between the carrying amount of the original asset derecognised and fair value of the new
substantially modified asset is recognised in profit or loss, unless the substance of the difference is
attributed to a capital transaction with owners. If the modified asset is not substantially different from the
original asset and the modification does not result in derecognition. The Group recalculates the gross
carrying amount by discounting the modified contractual cash flows by the original effective interest rate (or
credit-adjusted effective interest rate for POCI financial assets), and recognises a modification gain or loss
in profit or loss.
Financial liabilities - measurement categories. Financial liabilities are classified as subsequently measured
at AC, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial
liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an
acquirer in a business combination and other financial liabilities designated as such at initial recognition
and (ii) financial guarantee contracts and loan commitments. The Group’s financial liabilities include trade
and other payables, lease liabilities, all of which are classified as AC in accordance with IFRS 9.
Financial liabilities - derecognition. Financial liabilities are derecognised when they are extinguished (i.e.
when the obligation specified in the contract is discharged, cancelled or expires).
Trade Receivables
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. If
collection is expected in one year or less, they are classified as current assets. If not, they are presented
as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method, less expected credit losses.
Prepayments
Prepayments are carried at cost less provision for impairment. A prepayment is classified as non-current
when the goods or services relating to the prepayment are expected to be obtained after one year, or when
the prepayment relates to an asset which will itself be classified as non-current upon initial recognition.
Prepayments to acquire assets are transferred to the carrying amount of the asset once the Group has
obtained control of the asset and it is probable that future economic benefits associated with the asset will
flow to the Group. Other prepayments are written off to profit or loss when the services relating to the
prepayments are received. If there is an indication that the assets, goods or services relating to a
prepayment will not be received, the carrying value of the prepayment is written down accordingly and a
corresponding impairment loss is recognised in profit or loss for the year.
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Investments in subsidiaries
Investments made by the Company in its subsidiaries are stated at cost in the Company’s financial
statements and reviewed for impairment if there are indications that the carrying value may not be
recoverable.
Loans issued to subsidiaries
Loans issued by the Company to its subsidiaries are initially recognised in the Company’s financial
statements at fair value and are subsequently carried at amortised cost using the effective interest method,
less credit loss allowance. Net change in credit losses and foreign exchange differences on loans issued
are recognised in the Company’s statement of profit or loss in the period when incurred.
Trade and Other Payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course
of business from suppliers. Accounts payable are classified as current liabilities if payment is due within
one year or less. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method.
Lease liabilities
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
●
fixed payments (including in-substance fixed payments), less any lease incentives receivable,
●
variable lease payments that are based on an index or a rate, initially measured using the index or
rate as at the commencement date,
●
the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and
●
payments of penalties for terminating the lease, if the lease term reflects the Group exercising that
option.
Extension and termination options are included in a number of property and equipment leases across the
Group. These terms are used to maximise operational flexibility in terms of managing contracts. Extension
options (or period after termination options) are only included in the lease term if the lease is reasonably
certain to be extended (or not terminated). Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases of the Group, the Group’s incremental borrowing rate is
used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of
similar value in a similar economic environment with similar terms and conditions.
To determine the incremental borrowing rate, the Group:
●
where possible, uses recent third-party financing received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions since third party financing was received,
●
uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk, and
●
makes adjustments specific to the lease, e.g. term, country, currency and collateral.
The Group is exposed to potential future increases in variable lease payments based on an index or rate,
which are not included in the lease liability until they take effect. When adjustments to lease payments
based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use
asset.
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Lease payments are allocated between principal and finance costs. The finance costs are charged to profit
or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance
of the liability for each period.
Payments associated with short-term leases and all leases of low-value assets under $5,000 are
recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease
term of 12 months or less.
Equity Instruments
Ordinary shares are classified as equity. Equity instruments issued by the Company and the Group are
recorded at the proceeds received, net of direct issue costs. Any excess of the fair value of consideration
received over the par value of shares issued is recorded as share premium in equity.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and deposits held at call with banks and other short-
term highly liquid investments which are readily convertible to a known amount of cash with insignificant
risk of change in value. Cash and cash equivalents are carried at amortised cost. Interest income that
relates to cash and cash equivalents on current and deposit accounts is disclosed within operating cash
flow.
Other short-term investments
Other short-term investments include current accounts and deposits held at banks, which do not meet the
cash and cash equivalents definition. Current accounts and deposits held at banks, which do not meet the
cash and cash equivalents definition are measured initially at fair value and subsequently carried at
amortised cost using the effective interest method. Interest received on other short-term investments is
disclosed within operating cash flow.
Interest income
Interest income is recognised as it accrues, taking into account the effective yield on the asset. Interest
income on current bank accounts and on demand deposits or term deposits with a maturity of less than
three months recognised as part of cash and cash equivalents is recognised as other operating income.
Interest income on term deposits other than those classified as cash and cash equivalents is recognised
as finance income.
Certain reclassifications have been made in the comparative numbers for better clarity and consistency of
presentation.
3.
Significant Accounting Judgements and Estimates
The Group makes estimates and judgements concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and judgements which have a risk
of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year
are discussed below.
Depreciation of Oil and Gas Development and Production Assets
Development and production assets held in property, plant and equipment are depreciated on a unit of
production basis at a rate calculated by reference to proved and probable reserves at the end of the period
plus the production in the period, and incorporating the estimated future cost of developing and extracting
those reserves. Future development costs are estimated using estimates about the number of wells
required to produce those reserves, the cost of the wells, future production facilities and operating costs,
together with assumptions on oil and gas realisations, and are revised annually. The reserves estimates
used are determined using estimates of gas in place, recovery factors, future hydrocarbon prices and also
take into consideration the Group’s latest development plan for the associated development and production
asset. The latest development plan and therefore the inputs used to determine the depreciation charge for
the MEX-GOL, SV and VAS fields continue until the end of the economic life of the fields, which is assessed
83
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
to be 2038, 2042 and 2033 respectively, based on the assessment contained in the DeGolyer &
MacNaughton reserves report for these fields. The licences for the MEX-GOL and SV fields have recently
been extended until 2044. Were the estimated reserves at the beginning of the year to differ by 10% from
previous assumptions, the impact on depreciation for the year ended 31 December 2024 would be to
increase it by $417,000 or decrease it by $504,000 (2023: increase by $1,066,000 or decrease by
$479,000).
Provision for Decommissioning
The Group has decommissioning obligations in respect of its Ukrainian assets. The full extent to which the
provision is required depends on the legal requirements at the time of decommissioning, the costs and
timing of any decommissioning works and the discount rate applied to such costs.
A detailed assessment of gross decommissioning cost was undertaken on a well-by-well basis using local
data on day rates and equipment costs. The discount rate applied on the decommissioning cost provision
as at 31 December 2024 was 4.67% (31 December 2023: 4.67%). The discount rate is calculated in real
terms based on the yield to maturity of Ukrainian Government bonds denominated in the currency in which
the liability is expected to be settled and with the settlement date that approximates the timing of settlement
of decommissioning obligations. Increase in the discount rate applied is caused by the growth of the
Ukrainian risk-free rate.
The change in estimate applied to calculate the provision as at 31 December 2024 resulted from the revision
of the estimated costs of decommissioning (increase of $1,036,000 in provision), an increase in the discount
rate applied (increase of $1,000 in provision), revision of the economic life of the VAS field and SC field
(increase of $477,000 in provision). The costs are expected to be incurred by 2038 on the MEX-GOL field,
by 2042 on the SV field, and by 2033 on the VAS field, which is the end of the estimated economic life of
the respective fields (Note 24).
Net Carrying Amount of Inter-Company Loans Receivable and Investments by the Company into a
Subsidiary
The Company has certain inter-company loans receivable from a subsidiary, which are eliminated on
consolidation. For the purpose of the Company’s financial statements, these receivable balances are
carried at amortised cost using the effective interest method, less credit loss allowance. Measurement of
lifetime expected credit losses on inter-company loans is a significant judgment that involves models and
data inputs including forward-looking information, current conditions and forecasts of future conditions
impacting the estimated future cash flows that are expected to be recovered, time value of money, etc. In
previous years, significant impairment charges were recorded against the carrying amount of the loans
issued to subsidiaries as the present value of estimated future cash flows discounted at the original effective
interest rate was less than the carrying amount of the loans, and the resulting impairment losses were
recognised in profit or loss in the Company’s financial statements.
For the purpose of assessment of the credit loss allowance as at 31 December 2024, the Company
considered all reasonable and supportable forward-looking information available as at that date without
undue cost and effort, which includes a range of factors, such as estimated future net cash flows to be
generated by the subsidiaries operating in Ukraine and cash flow management. All these factors have a
significant impact on the amounts subject to repayment on the loans and investments. The estimated future
discounted cash flows generated by the subsidiaries operating in Ukraine are considered as a primary
source of repayment on the loans and investments. As at 31 December 2024, the present value of future
net cash flows to be generated by the subsidiaries operating in Ukraine during 2025 – 2029, adjusted for
the subsidiaries’ working capital as at 31 December 2024 and estimated amounts reserved by the Group
for investment projects in the time horizon was calculated.
The key assumptions used in the discounted cash flow model are:
•
production levels for a period of five years assumed to be: at the level of 0.06 MMboe for the MEX-
GOL and SV fields and 0.01 MMboe for the VAS field during their respective periods of suspension,
and 1.87 MMboe for the SC licence area;
84
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
•
proved plus probable (2P) reserves at the beginning of 2024 at the MEX-GOL and SV fields of 43.0
MMboe, at the VAS field of 2.3 MMboe and at the SC licence area of 12.1 MMboe;
•
commodity prices – the model assumes gas prices of $320/Mm3 in 2025 and in subsequent years;
•
discount rate applied is 18.28% in 2025, 15.04% in 2026, 11.79% in 2027 and beyond, determined
in real terms;
•
production taxes applicable to gas production at variable rates under relevant legislation;
•
capital expenditure allowance for maintenance and development of: MEX-GOL and SV fields at the
level of $750,000 per year, VAS field at the level of $100,000 per year and SC licence area at the
level of $250,000 per year;
•
future capital expenditures for a period of five years assumed to be: for the MEX-GOL and SV fields
at the level of $0, VAS field at the level of $0 and SC licence area at the level of $92,500,000;
•
life of field for the purpose of the assessment of loans – cash flows were taken for a period of five
years as management believes there is no reasonably available information to build reliable
expectations and demonstrate the ability to settle the loans over a longer perspective;
•
life of field for the purpose of the assessment of investments – cash flows were taken for a period of
the full economic life of the respective CGUs.
The resulting amount, net of the carrying value of the Company’s investments in subsidiaries and loans,
was compared to the discounted cash flows and net financial assets of the subsidiaries as at
31 December 2024. As such, the Company has recorded $10,034,000 of loss, being the net change in the
expected credit losses for loans issued to and investments in subsidiaries in the Company’s statement of
profit or loss for the year ended 31 December 2024.
As with any economic forecast, the projections and likelihoods of occurrence are subject to a high degree
of inherent uncertainty, and therefore the actual outcomes may be significantly different to those projected.
The Company considers these forecasts to represent its best estimate of the possible outcomes.
4.
Segmental Information
In line with the Group’s internal reporting framework and management structure, the key strategic and
operating decisions are made by the Board of Directors, who review internal monthly management reports,
budget and forecast information as part of this process. Accordingly, the Board of Directors is deemed to
be the Chief Operating Decision Maker within the Group.
The Group’s only class of business activity is oil and gas exploration, development and production. The
Group’s operations are located in Ukraine, with its head office in the United Kingdom. These geographical
regions are the basis on which the Group reports its segment information. The segment results as
presented represent operating profit before depreciation, amortisation and impairment of non-current
assets.
85
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Ukraine
United
Kingdom
Total
2024
2024
2024
$000
$000
$000
Revenue
Gas sales
27,830
-
27,830
Condensate sales
11,153
-
11,153
Liquefied Petroleum Gas sales
5,521
-
5,521
Oil
424
-
424
Total revenue
44,928
-
44,928
Segment result
32,337
2,309
34,646
Depreciation and amortisation of non-current
assets
(5,534)
(6)
(5,540)
Operating profit
29,106
Segment assets
173,359
17,649
191,008
Capital additions*
3,660
-
3,660
*Comprises additions to property, plant and equipment (Note 16)
There are no inter-segment sales within the Group and all products are sold in the geographical region in
which they are produced. The Group is not significantly impacted by seasonality. Revenue is recognised at
a point in time.
During 2024, 78% of all revenue generated by the Group was from sales to its top five customers (2023:
79%).
Until May 2023, the Group was selling all of its gas production to its related party, LLC Smart Energy. LLC
Smart Energy has oil and gas operations in Ukraine and is part of the PJSC Smart-Holding Group.
Ukraine
United
Kingdom
Total
2023
2023
2023
$000
$000
$000
Revenue
Gas sales
42,270
-
42,270
Condensate sales
10,466
-
10,466
Liquefied Petroleum Gas sales
9,458
-
9,458
Total revenue
62,194
-
62,194
Segment result
43,649
(1,409)
42,240
Depreciation and amortisation of non-current assets
(6,704)
-
(6,704)
Operating profit
35,536
Segment assets
161,232
22,100
183,332
Capital additions*
15,749
-
15,749
*Comprises additions to property, plant and equipment (Note 16)
86
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
5.
Cost of Sales
2024
2023
$000
$000
Production taxes
4,852
8,610
Depreciation of property, plant and equipment
4,540
5,719
Staff costs (Note 8)
2,393
2,142
Rent expenses (Note 18)
1,330
2,573
Cost of inventories recognised as an expense
1,315
1,587
Amortisation of mineral reserves (Note 17)
327
359
Transmission tariff for Ukrainian gas system
234
322
Cost of purchased gas
184
616
Other expenses
1,518
1,294
16,693
23,222
A transmission tariff for use of the Ukrainian gas transit system of UAH101.93/Mm3 of gas was applicable
to the Group (2023: UAH101.93/Mm3).
6.
Administrative Expenses
2024
2023
$000
$000
Staff costs (Note 8)
3,167
3,585
Consultancy fees
1,367
1,567
Depreciation of other fixed assets
290
321
Amortisation of other intangible assets
193
113
Professional services
168
339
Group Auditor’s remuneration*
145
146
Rent expenses
118
137
Other expenses
742
745
6,190
6,953
*The Group Auditor did not provide any non-audit services for the 2024 and 2023 audits.
7.
Remuneration of Directors
2024
2023
$000
$000
Directors’ emoluments
1,632
815
87
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
The emoluments of the individual Directors were as follows:
Total
Emoluments
Total
emoluments
2024
2023
$000
$000
Executive Directors:
Bruce Burrows
470
343
Sergii Glazunov
348
180
Oleksiy Zayets
261
-
Non-executive Directors:
Chris Hopkinson
55
124
Alexey Pertin
72
56
Yuliia Kirianova
76
56
Igor Basai
47
-
Dr Gehrig Schultz
114
56
Valceschini Charles
189
-
1,632
815
The emoluments include base salary, bonuses and fees. According to the Register of Directors’ Interests,
no rights to subscribe for shares in or debentures of any Group companies were granted to any of the
Directors or their immediate families during the financial year, and there were no outstanding options to
Directors.
8.
Staff Numbers and Costs
The average monthly number of employees during the year (including Executive Directors) and the
aggregate staff costs of such employees were as follows:
Number of employees
2024
2023
Group
Management / operational
167
169
Administrative support
112
70
279
239
The prior year comparative numbers of employees were amended to conform to the current year
presentation. The number of employees includes full-time and part-time employees.
2024
2023
$000
$000
Wages and salaries
4,570
5,268
Security costs
1,229
803
5,799
6,071
88
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
9.
Other Operating Gains/(Losses), (net)
2024
2023
$000
$000
Interest income on cash and cash equivalents
7,914
4,578
Staff costs (Note 8)
(239)
(344)
Depreciation and amortisation (Note 17)
(191)
(192)
Foreign exchange gain/(losses)
(121)
-
Gain on sales of current assets
-
5
Write-off of accounts payable debts
63
-
Fines and penalties received/(applied)
(68)
1
Other operating (loss)/income, net
(297)
(531)
7,061
3,517
10. Finance Income
2024
2023
$000
$000
Financial instrument: unwinding of discount
7
2,144
7
2,144
11. Finance Costs
2024
2023
$000
$000
Unwinding of discount on provision for decommissioning (Note 24)
323
331
Unwinding of discount on financial liabilities and other financial costs
260
2,291
Interest expense on lease liabilities (Note 18)
80
83
663
2,705
12. Other Gains/(Losses), (net)
2024
2023
$000
$000
Charitable donations
(18)
(17)
Foreign exchange gains/(losses)
-
731
Other gains/(losses), (net)
22
(31)
4
683
Charitable donations for the year ended 31 December 2024 and 2023 comprise humanitarian aid for the
population and armed forces of Ukraine.
89
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
13. Income Tax Expense
a)
Income tax expense and (benefit):
2024
2023
$000
$000
Current tax
UK - current year
-
131
UK - prior year
-
-
Overseas - current year
5,459
6,621
Overseas - prior year
-
83
Deferred tax (Note 25)
UK - current year
-
1,941
UK - prior year
-
-
Overseas - current year
1,237
(79)
Income tax expense
6,696
8,697
b)
Factors affecting tax charge for the year:
The corporation tax rate in the UK was 25.00% in 2024 (in 2023 it was 19.00% rising to 25.00% from 1 April
2023). The expense for the year can be reconciled to the profit as per the Income Statement as follows:
2024
2023
$000
$000
Profit before taxation
30,419
35,183
Tax charge at UK tax rate of 25.00% (2023: 19.00%/25.00%)
7,605
7,010
Tax effects of:
Lower foreign corporate tax rates in Ukraine (18.00%) (2023: 18.00%)
(2,326)
(504)
Disallowed expenses and non-taxable income
(1,677)
3,148
Previously unrecognised tax losses used to reduce income tax expense
3,094
(957)
Adjustments in respect of prior periods
-
-
Total tax expense for the year
6,696
8,697
The tax effect of disallowed expenses and non-taxable income are mainly represented by foreign exchange
differences of LLC Regal Petroleum Corporation (Ukraine) Limited and the net change in credit loss
allowance for loans issued to subsidiaries and shares in subsidiary undertakings.
The tax effect of losses not recognised as deferred tax assets are mainly represented by accumulated
losses of LLC Regal Petroleum Corporation (Ukraine) Limited.
14. Profit/(Loss) for the Year
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act
2006 and has not presented its own Income Statement in these financial statements. The Parent Company
loss after tax was $12,940,000 for the year ended 31 December 2024 (2023: profit after tax $7,151,000).
15. Earnings per Share
The calculation of basic earnings per ordinary share has been based on the profit for the year and
320,637,836 (2023: 320,637,836) ordinary shares, being the weighted average number of shares in issue
for the year. There are no dilutive instruments.
90
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
16. Property, Plant and Equipment
2024
2023
Oil and Gas
Development
and
Production
assets
Ukraine
Oil and Gas
Exploration
and
Evaluation
Assets
Other
fixed
assets
Total
Oil and Gas
Development
and
Production
assets
Ukraine
Oil and Gas
Exploration
and
Evaluation
Assets
Other
fixed
assets
Total
Group
$000
$000
$000
$000
$000
$000
$000
$000
Cost
At the beginning of the year
141,902
13,944
2,181
158,027
135,255
13,093
1,968
150,316
Additions
3,232
336
92
3,660
13,530
1,403
816
15,749
Change in decommissioning provision
1,392
40
-
1,432
293
(13)
-
280
Disposals
(114)
-
(120)
(234)
(1,389)
-
(519)
(1,908)
Reclass from non-O&G to O&G
(33)
-
33
-
-
-
-
-
Exchange differences
(13,705)
(1,381)
(194)
(15,280)
(5,787)
(539)
(84)
(6,410)
At the end of the year
132,674
12,939
1,992
147,605
141,902
13,944
2,181
158,027
Accumulated depreciation and impairment
At the beginning of the year
75,619
1,635
1,496
78,750
73,108
1,677
1,275
76,060
Charge for year
4,535
-
218
4,753
5,555
-
304
5,859
Disposals
(113)
-
(63)
(176)
(95)
-
(95)
(190)
Exchange differences
(7,497)
(157)
(151)
(7,805)
(2,949)
(42)
12
(2,979)
At the end of the year
72,544
1,478
1,500
75,522
75,619
1,635
1,496
78,750
Net book value at the beginning of
the year
66,283
12,309
685
79,277
62,147
11,416
693
74,256
Net book value at the end of the year
60,130
11,461
492
72,083
66,283
12,309
685
79,277
MEX-GOL, SV, SC and VAS gas and condensate fields
In accordance with the Group’s accounting policies, oil and gas development and producing assets are tested for an impairment loss at each balance sheet date.
As at 31 December 2024, oil and gas development and producing assets were tested for an impairment loss, however no loss was recognised in the period (Note
3).
91
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
17.
Intangible Assets
2024
2023
Mineral
reserve rights
Exploration
and
evaluation
intangible
assets
Other
intangible
assets
Total
Mineral
reserve rights
Exploration
and
evaluation
intangible
assets
Other
intangible
assets
Total
Group
$000
$000
$000
$000
$000
$000
$000
$000
Cost
At the beginning of the year
4,891
6,190
914
11,995
5,080
6,433
860
12,373
Additions
-
-
277
277
-
-
196
196
Disposals
-
-
(74)
(74)
-
-
(108)
(108)
Exchange differences
(472)
(605)
(92)
(1,169)
(189)
(243)
(34)
(466)
At the end of the year
4,419
5,585
1,025
11,029
4,891
6,190
914
11,995
Accumulated amortisation
At the beginning of the year
3,162
-
461
3,623
2,925
-
454
3,379
Charge for year
327
-
195
522
359
-
130
489
Disposals
-
-
(74)
(74)
-
-
(106)
(106)
Exchange differences
(320)
-
(39)
(359)
(122)
-
(17)
(139)
At the end of the year
3,169
-
543
3,712
3,162
-
461
3,623
Net book value at the beginning of the
year
1,729
6,190
453
8,372
2,155
6,433
406
8,994
Net book value at the end of the year
1,250
5,585
482
7,317
1,729
6,190
453
8,372
92
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Intangible assets consist mainly of the hydrocarbon production licence relating to the VAS field which is
held by one of the Group's subsidiaries, LLC Prom-Enerho Produkt, and a hydrocarbon exploration licence
relating to the Svystunivsko-Chervonolutskyi (“SC”) area which is held by LLC Arkona Gas-Energy. The
Group amortises the hydrocarbon production licence relating to the VAS field using the straight-line method
over the term of the economic life of the VAS field until 2028. The hydrocarbon exploration licence relating
to the SC area is not amortised due to it being in an exploration and evaluation stage.
In accordance with the Group’s accounting policies, intangible assets are tested for impairment at each
balance sheet date as part of the impairment testing of the Group’s oil and gas development and production
assets if impairment indicators exist. As at 31 December 2024, intangible assets were tested for an
impairment loss, however no loss was recognised in the period.
18.
Right-of-use Assets
This note provides information for right-of-use assets and leases obligations where the Group is a lessee.
Amount recognised in the balance sheet:
2024
2023
$000
$000
Right-of-use assets
Properties
469
-
Land
132
153
Wells
32
39
633
192
2024
2023
$000
$000
Lease liabilities
Current
343
38
Non-current
492
245
835
283
Additions to the right-of-use assets during the 2024 year were $790,000 (2023: $115,000 of disposals).
Amounts recognised in the statement of profit or loss:
2024
2023
$000
$000
Depreciation charge
Properties
(384)
(199)
Land
(10)
(11)
Wells
(4)
(5)
(398)
(215)
Interest expense (included in finance cost) (Note 11)
(80)
(331)
Expense relating to short-term leases (included in cost of sales and
administrative expenses)
(118)
(132)
Expense relating to variable lease payments not included in lease
liabilities (included in cost of sales) (Note 5)
(1,282)
(2,522)
Expense relating to lease payments for land under wells not included in
lease liabilities (included in cost of sales) (Note 5)
(48)
(42)
The total cash outflow for leases in 2024 was $2,131,000 (2023: $3,835,000).
93
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
19.
Investments and Loans to Subsidiary Undertakings
Shares in
subsidiary
undertakings
Loans to
subsidiary
undertakings
Total
$000
$000
$000
Company
As at 1 January 2023
30,704
49,974
80,678
Additions including accrued interest
-
2,795
2,795
Repayment of interest and loans
-
-
-
Impairment
-
(14,979)
(14,979)
Exchange differences
-
1,416
1,416
As at 31 December 2023
30,704
39,206
69,910
Additions including accrued interest
-
2,795
2,795
Repayment of interest and loans
-
-
-
Impairment
(1,072)
(8,962)
(10,034)
Exchange differences
-
(2,869)
(2,869)
As at 31 December 2024
29,632
30,170
59,802
The Company has recorded a loss of $10,034,000, being the net change in expected credit losses for loans
issued to subsidiaries in the Company’s statement of profit or loss for the year ended 31 December 2024
(Note 3) (2023: $14,979,000).
The Company’s discounted cash flow model used for the assessment of the investments recoverability,
flexed for sensitivities, produced the following results:
31 December 2024
31 December 2023
$000
$000
Discount rate (increase)/decrease by 1%
(552)/601
1,355/1,472
Change in gas price increase/(decrease) by 10%
5,047/(5,063)
2,734/(13,698)
94
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
The table presented below discloses the changes in the gross carrying amount and credit loss allowance
between the beginning and the end of the reporting period for loans to subsidiary undertakings carried at
amortised cost and classified within a three-stage model for impairment assessment as at
31 December 2024:
Credit loss allowance
Gross carrying amount
Stage 1 Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
(12-
months
ECL)
(lifetime
ECL for
SICR)
(lifetime
ECL for
credit
impaired)
(12-
months
ECL)
(lifetime
ECL for
SICR)
(lifetime
ECL for
credit
impaired)
$000
$000
$000
$000
$000
$000
$000
$000
As at 1 January 2024
(5,260)
-
(27,750)
(33,010)
18,194
-
54,022
72,216
Movements with impact
on credit loss allowance
charge for the year:
Modification of loans
-
-
3,038
3,038
-
-
(3,038)
(3,038)
Additions including
accrued interest
-
-
-
-
960
-
1,835
2,795
Payment of interest
-
-
-
-
-
-
-
-
Repayment of loans
-
-
-
-
-
-
-
-
Exchange difference
-
-
-
-
-
-
(2,869)
(2,869)
Changes to ECL
measurement model
assumptions
(2,011)
-
(6,950)
(8,962)
-
-
-
-
Total movements with
impact on credit loss
allowance charge for
the year
(2,011)
-
(3,912)
(5,923)
960
-
(4,072)
(3,112)
As at 31 December
2024
(7,272)
-
(31,662)
(38,934)
19,154
-
49,950
69,104
ECL - Expected credit losses
SICR - Significant increase in credit risk
95
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
The table presented below discloses the changes in the gross carrying amount and credit loss allowance
between the beginning and the end of the reporting period for loans to subsidiary undertakings carried at
amortised cost and classified within a three-stage model for impairment assessment as at
31 December 2023:
Credit loss allowance
Gross carrying amount
Stage 1 Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
(12-
months
ECL)
(lifetime
ECL for
SICR)
(lifetime
ECL for
credit
impaired)
(12-
months
ECL)
(lifetime
ECL for
SICR)
(lifetime
ECL for
credit
impaired)
$000
$000
$000
$000
$000
$000
$000
$000
As at 1 January 2023
(1,722)
-
(17,831)
(19,553)
17,234
-
52,293
69,527
Movements with impact
on credit loss allowance
charge for the year:
Modification of loans
-
-
1,522
1,522
-
-
(1,522)
(1,522)
Additions including
accrued interest
-
-
-
-
960
-
1,835
2,795
Payment of interest
-
-
-
-
-
-
-
-
Repayment of loans
-
-
-
-
-
-
-
-
Exchange difference
-
-
-
-
-
-
1,416
1,416
Changes to ECL
measurement model
assumptions
(3,538)
-
(11,441)
(14,979)
-
-
-
-
Total movements with
impact on credit loss
allowance charge for the
year
(3,538)
-
(9,919)
(13,457)
960
-
1,729
2,689
As at 31 December
2023
(5,260)
-
(27,750)
(33,010)
18,194
-
54,022
72,216
ECL – Expected credit losses
SICR – Significant increase in credit risk
96
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Subsidiary undertakings
As at 31 December 2024 and 2023, the Company’s subsidiary undertakings, all of which are included in
the consolidated financial statements, were:
Registered address
Country of
incorporation
Country of
operation
Principal
activity
% of shares held
31 December
2024
31 December
2023
Regal Petroleum
Corporation
Limited
3rd Floor, Charter Place,
23-27 Seaton Place, St
Helier, Jersey, JE4 0WH
Jersey
Ukraine
Oil & Natural
Gas Extraction
100%
100%
Regal Petroleum
Corporation
Limited (Branch
Office)
162 Shevchenko Str.,
Yakhnyky Village,
Lokhvytsya District,
Poltava Region, 37212
Ukraine
Oil & Natural
Gas Extraction
LLC Arkona
Gas-Energy
162 Shevchenko Str.,
Yakhnyky Village,
Lokhvytsya District,
Poltava Region, 37212
Ukraine
Ukraine
Exploration
and Evaluation
for Oil and
Natural Gas
100%
100%
LLC Regal
Petroleum
Corporation
(Ukraine)
Limited
162 Shevchenko Str.,
Yakhnyky Village,
Lokhvytsya District,
Poltava Region, 37212
Ukraine
Ukraine
Holding
Company
100%
100%
LLC Prom-
Enerho Produkt
3 Klemanska Str., Kiev,
02081
Ukraine
Ukraine
Oil & Natural
Gas Extraction
100%
100%
Well Investum
LLC
58 Yaroslavska str.,
Kyiv, 04071
Ukraine
Ukraine
Dormant
Company
100%
-
*Regal Group
Services Limited
16 Old Queen Street,
London, SW1H 9HP
United
Kingdom
United
Kingdom
Service
Company
100%
100%
Regal Group Services Limited was dissolved on 21 February 2023.
The Parent Company, Enwell Energy plc, holds direct interests in 100% of the share capital of Regal
Petroleum Corporation Limited, LLC Regal Petroleum Corporation (Ukraine) Limited, LLC Arkona Gas-
Energy and Well Investum LLC, and a 100% indirect interest in LLC Prom-Enerho Produkt through its 100%
shareholding in LLC Regal Petroleum Corporation (Ukraine) Limited, which owns all of the share capital of
LLC Prom-Enerho Produkt. The Parent Company, Enwell Energy plc, held a direct interest in 100% of the
share capital of Regal Group Services Limited until it was dissolved on 21 February 2023.
20.
Inventories
Group
2024
2023
$000
$000
Current
Materials and spare parts
2,465
2,336
Finished goods
687
615
3,152
2,951
Inventories consist of materials, spare parts and finished goods. Materials and spare parts are represented
by spare parts that were not assigned to any new wells, production raw materials and fuel at the storage
facility. Finished goods consist of produced gas held in underground gas storage facilities and condensate
and LPG held at the processing facility prior to sale.
97
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
As at 31 December 2024, allowances for impairment of materials and spare parts amounted to $606,000
(31 December 2023: $671,000).
All inventories are measured at the lower of cost or net realisable value. There was no write down of
inventory as at 31 December 2024 or 2023.
21.
Trade and Other Receivables
Group
Company
2024
2023
2024
2023
$000
$000
$000
$000
Trade receivables
2,951
11,580
-
4
Accounts receivable from accrued
income
355
336
-
-
Other financial receivables
1,308
533
600
533
Less credit loss allowance
(134)
(323)
-
-
Total financial receivables
4,480
12,126
600
537
Prepayments
665
350
253
-
Other receivables
3,057
3,109
946
832
Less credit loss allowance
(554)
-
(551)
Total trade and other receivables
7,648
15,585
1,248
1,369
Due to the short-term nature of the trade and other receivables, their carrying amount is assumed to be the
same as their fair value. All trade and other financial receivables, except those provided for, are considered
to be of high credit quality.
As at 31 December 2024 and 2023, 100% of the Group’s trade receivables were denominated in Ukrainian
Hryvnia. Further description of financial receivables is disclosed in Note 29.
Analysis by credit quality of financial trade and other receivables and expected credit loss allowance as at
31 December 2024 is as follows:
Loss rate
Gross carrying
amount
Life-
time ECL
Carrying
amount
Basis
$000
$000
$000
Trade receivables -
credit impaired
100%
60
(60)
-
number of days the
asset is past due
Trade receivables -
other
37.96%
2,891
(74)
2,817
historical credit
losses experienced
Prepayments - credit
impaired
100%
3
(3)
-
number of days the
asset is past due
Prepayments - other
37.96%
663
-
663
historical credit
losses experienced
Other receivables -
credit impaired
100%
551
(551)
-
number of days the
asset is past due
Other receivables -
other
37.96%
2,504
-
2,504
historical credit
losses experienced
Total trade and other
receivables for which
individual approach
for ECL is used
6,672
(688)
5,984
98
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Analysis by credit quality of financial trade and other receivables and expected credit loss allowance as at
31 December 2023 is as follows:
Loss rate
Gross carrying
amount
Life-
time ECL
Carrying
amount
Basis
$000
$000
$000
Trade receivables from
related parties
28.91%
-
-
-
financial position of
related party
Trade receivables -
credit impaired
100%
95
(95)
-
number of days the
asset is past due
Trade receivables -
other
28.91%
11,485
(227)
11,258
historical credit
losses experienced
Other financial
receivables
28.91%
533
(1)
532
individual default
rates
Total trade and other
receivables for which
individual approach
for ECL is used
12,113
(323)
11,790
ECL - Expected credit losses
The following table explains the changes in the credit loss allowance for trade and other receivables under
the simplified ECL model between the beginning and the end of the year:
2024
2023
$000
$000
Trade and other receivables
Balance as at 1 January
323
433
New originated or purchased
483
151
Financial assets derecognised during the year
(249)
(460)
Changes in estimates and assumptions
162
210
Foreign exchange movements
(31)
(12)
Balance as at 31 December
688
323
22.
Cash and Cash Equivalents
Group
Company
2024
2023
2024
2023
$000
$000
$000
$000
Cash and Cash Equivalents
Cash at bank
66,095
54,873
16,369
20,695
Demand deposits and term deposits with
maturity of less than 3 months
33,303
21,620
-
-
99,398
76,493
16,369
20,695
99
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Cash at bank earns interest at fluctuating rates based on daily bank deposit rates. Demand deposits are
made for varying periods depending on the immediate cash requirements of the Group and earn interest at
the respective short-term deposit rates. The terms and conditions upon which the Group’s demand deposits
are made allow immediate access to all cash deposits, with no significant loss of interest.
Group
Company
2024
2023
2024
2023
$000
$000
$000
$000
Cash and Cash Equivalents
Ukrainian Hryvnia
83,026
55,787
-
-
US Dollars
15,954
20,341
15,951
20,330
Euros
247
249
247
249
British Pounds
171
116
171
116
99,398
76,493
16,369
20,695
The credit quality of cash and cash equivalents balances may be summarised based on Moody’s ratings
as follows as at 31 December:
Cash at bank
and on hand
Short-term
deposits
Demand deposits
and term deposits
with maturity less
than 3 months
Total cash and
cash equivalents
and other short-
term investments
2024
2024
2024
$000
$000
$000
A- to A+ rated
16,372
-
-
16,372
B- to B+ rated
-
-
-
-
C- to C+ rated
23,114
-
-
23,114
Unrated
26,609
33,303
-
59,912
66,095
33,303
-
99,398
Cash at bank
and on hand
Short-term deposits
Demand deposits
and term deposits
with maturity less
than 3 months
Total cash and
cash equivalents
and other short-
term investments
2023
2023
2023
$000
$000
$000
A- to A+ rated
20,708
-
-
20,708
B- to B+ rated
-
-
-
-
C- to C+ rated
4,017
-
-
4,017
Unrated
30,148
21,620
-
51,768
54,873
21,620
-
76,493
For cash and cash equivalents, the Group assessed ECL based on the Moody’s rating for rated banks and
based on the local national rating agencies as at 31 December 2024 for non-rated banks. Based on this
assessment, the Group concluded that the identified impairment loss was immaterial.
100
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
23.
Trade and Other Payables
Group
Company
2024
2023
2024
2023
$000
$000
$000
$000
Taxation and social security
1,035
1,632
25
32
Trade payables
315
1,293
46
-
Other payables
1,887
2,934
479
2,139
Advances received
49
153
-
-
3,286
6,012
550
2,171
The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to
their short-term nature. Financial payables are disclosed in Note 29.
24.
Provision for Decommissioning
2024
2023
$000
$000
Group
At the beginning of the year
7,305
6,964
Unwinding of discount
323
331
Change in estimate
1,432
280
Effect of exchange difference
(784)
(270)
At the end of the year
8,276
7,305
The provision for decommissioning is based on the net present value of the Group’s estimated liability for
the removal of the Ukrainian production facilities and well site restoration at the end of production life.
The non-current provision of $8,276,000 (31 December 2023: $7,305,000) represents a provision for the
decommissioning of the Group’s MEX-GOL, SV, VAS and SC production and exploration facilities, including
site restoration.
The change in estimates applied to calculate the provision as at 31 December 2024 is explained in Note 3.
The principal assumptions used are as follows:
31 December 2024
31 December 2023
Discount rate
4.67%
4.67%
Average cost of restoration per well ($000)
307
339
The sensitivity of the restoration provision to changes in the principal assumptions to the provision balance
and related asset is presented below:
31 December 2024
31 December 2023
$000
$000
Discount rate (increase)/decrease by 1%
(961)/1,123
(1,005)/1,187
Change in average cost of well restoration
increase/(decrease) by 10%
828/(828)
653/(653)
101
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
25.
Deferred Tax
2024
2023
$000
$000
Deferred tax (liability)/asset recognised relating to oil and
gas development and production assets at the MEX-GOL-
SV fields and provision for decommissioning
At the beginning of the year
(4,976)
(3,232)
Charged to Income Statement - UK current year
(1,284)
(1,941)
Charged to Income Statement - UK prior year
-
-
Effect of exchange difference
464
197
At the end of the year
(5,796)
(4,976)
2024
2023
$000
$000
Deferred tax asset/(liability) recognised relating to
development and production assets at the VAS field and
provision for decommissioning
At the beginning of the year
352
287
Credited to Income Statement - overseas current year
47
79
Effect of exchange difference
(36)
(14)
At the end of the year
363
352
There was a further $68,480,085 (31 December 2023: $77,523,000) of unrecognised UK tax losses carried
forward for which no deferred tax asset in the amount of $17,120,021 has been recognised. These losses
can be carried forward indefinitely, subject to certain rules regarding capital transactions and changes in
the trade of the Company. However, as at the balance sheet date, there is no evidence that taxable profit
will be available against which the unused tax losses can be realised.
The deferred tax asset relating to the Group’s provision for decommissioning as at 31 December 2024 of
$615,000 (31 December 2023: $555,000) was recognised on the tax effect of the temporary differences of
the Group’s provision for decommissioning at the MEX-GOL and SV fields, and its tax base. The deferred
tax liability relating to the Group’s development and production assets at the MEX-GOL and SV fields as at
31 December 2024 of $6,411,000 (31 December 2023: $5,531,000) was recognised on the tax effect of the
temporary differences between the carrying value of the Group’s development and production asset at the
MEX-GOL and SV fields, and its tax base. The deferred tax liability will be settled more than twelve months
after the reporting period.
The deferred tax asset relating to the Group’s provision for decommissioning as at 31 December 2024 of
$355,000 (31 December 2023: $280,000) was recognised on the tax effect of the temporary differences on
the Group’s provision on decommissioning at the VAS field, and its tax base. The deferred tax asset relating
to the Group’s development and production assets at the VAS field as at 31 December 2024 of $8,000
(31 December 2022: deferred tax liability of $72,000) was recognised on the tax effect of the temporary
differences between the carrying value of the Group’s development and production asset at the VAS field,
and its tax base. The deferred tax asset is expected to be recovered more than twelve months after the
reporting period.
Losses accumulated in a Ukrainian subsidiary service company of UAH1,574,676,772 ($37,457,522) as at
31 December 2024 and UAH1,443,349,000 ($38,000,000) as at 31 December 2023 mainly originated as
foreign exchange differences on inter-company loans and for which no deferred tax asset was recognised
as this subsidiary is not expected to have taxable profits to utilise these losses in the future.
As at 31 December 2024 and 2023, the Group has not recorded a deferred tax liability in respect of taxable
temporary differences associated with investments in subsidiaries as the Group is able to control the timing
of the reversal of those temporary differences and does not intend to reverse them in the foreseeable future.
102
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Double tax treaty
In accordance with the Double Tax Treaties between Ukraine and the United Kingdom, the Group accrues
and pays withholding tax on current amounts of interest at the moment when such interest accrues and is
paid.
26. Called Up Share Capital
2024
2023
Number
$000
Number
$000
Allotted, called up and fully paid
Opening balance as at 1 January
320,637,836
28,115
320,637,836
28,115
Issued during the year
-
-
-
-
Closing balance as at 31 December
320,637,836
28,115
320,637,836
28,115
There are no restrictions over ordinary shares issued. The Company is a public company limited by shares.
27. Other Reserves
The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote
per share at any general meeting of shareholders.
Other reserves, the movements in which are shown in the statements of changes in equity, comprise the
following:
Capital contributions reserve
The capital contributions reserve is non-distributable and represents the value of equity invested in
subsidiary entities prior to the Company listing.
Merger reserve
The merger reserve represents the difference between the nominal value of shares acquired by the
Company and those issued to acquire subsidiary undertakings. This balance relates wholly to the
acquisition of Regal Petroleum (Jersey) Limited and that company’s acquisition of Regal Petroleum
Corporation Limited during 2002.
Foreign exchange reserve
Exchange reserve movement for the year attributable to currency fluctuations. This balance predominantly
represents the result of exchange differences on non-monetary assets and liabilities where the subsidiaries’
functional currency is not the US Dollar.
103
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
28. Reconciliation of Operating Profit to Operating Cash Flow
2024
2023
$000
$000
Group
Operating profit
29,386
35,536
Depreciation and amortisation
5,674
6,704
Less interest income recorded within operating profit
(7,914)
(4,578)
Fines and penalties received/(paid)
68
(1)
Gain on sales of current assets, net
-
(5)
Net (gain)/loss on sale of non-current assets
(35)
(1)
Change in working capital:
Decrease/(Increase) in provisions
522
(492)
(Increase)/decrease in inventory
(501)
1,880
Decrease in receivables
8,500
44,956
(Decrease) in payables
(2,661)
(21,052)
Cash generated from operations
33,039
62,947
2024
2023
$000
$000
Company
Operating loss
(12,829)
(16,994)
Interest received
(920)
(1,661)
Depreciation
6
-
Change in working capital:
Movement in provisions (including impairment of subsidiary loans)
10,021
14,979
Decrease/(increase) in receivables
101
(754)
(Decrease)/increase in payables
(1,307)
1,455
Cash used in operations
(4,928)
(2,975)
29. Financial Instruments
Capital Risk Management
The Group defines its capital as equity. As at 31 December 2024, net assets were $171,440,000
(31 December 2023: $162,121,000). The primary source of the Group’s liquidity has been cash generated
from operations. The Group’s objectives when managing capital are to safeguard the Group’s and the
Company's ability to continue as a going concern in order to provide returns for shareholders and benefits
for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets.
The capital structure of the Group consists of equity attributable to the equity holders of the parent,
comprising issued share capital, share premium, reserves and retained earnings.
There are no capital requirements imposed on the Group.
Financial Risk Management
The Group’s financial instruments comprise cash and cash equivalents and various items such as debtors
and creditors that arise directly from its operations. The Group has bank accounts denominated in British
Pounds, US Dollars, Euros and Ukrainian Hryvnia. The Group does not have any external borrowings. The
main future risks arising from the Group’s financial instruments are currently currency risk, interest rate risk,
liquidity risk and credit risk.
104
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
The Group’s financial assets and financial liabilities comprise the following:
Financial Assets
2024
2023
$000
$000
Group
Cash and cash equivalents
99,398
76,493
Trade and other financial receivables
4,125
11,790
Non-current receivables
51
-
103,573
88,283
2024
2023
$000
$000
Company
Cash and cash equivalents
16,369
20,695
Loans to subsidiary undertakings
30,170
39,206
46,539
59,901
Financial Liabilities
2024
2023
$000
$000
Group
Lease liabilities
835
283
Trade and other payables
315
1,293
Other financial liabilities
655
1,248
1,805
2,824
2024
2023
$000
$000
Company
Trade and other payables
245
2,139
245
2,139
Financial assets and financial liabilities are measured at amortised cost, which approximates their fair value
as the instruments are mostly short-term. Assets and liabilities of the Group where fair value is disclosed
are level 2 in the fair value hierarchy and valued using the current cost accounting technique.
Financial instruments that potentially subject the Group to concentrations of credit risk consist primarily of
cash and cash equivalents and accounts receivable, and financial instruments that potentially subject the
Company to concentrations of credit risk consist primarily of cash and cash equivalents and loans to
subsidiary undertakings.
Currency Risk
The functional currencies of the Group’s entities are US Dollars and Ukrainian Hryvnia. The following
analysis of net monetary assets and liabilities shows the Group’s currency exposures. Exposures comprise
the monetary assets and liabilities of the Group that are not denominated in the functional currency of the
relevant entity.
2024
2023
Currency
$000
$000
British Pounds
383
182
US Dollars
1,363
-
Euros
242
262
Net monetary assets less liabilities
1,988
444
105
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
The sensitivity of the exchange rate of US Dollars is presented below:
31 December 2024
31 December 2023
$000
$000
Increase/(decrease) by 10%
63/(63)
23/(23)
The prior year comparative figures were amended to conform to the current year presentation.
Interest Rate Risk Management
The Group is not exposed to interest rate risk on financial liabilities as none of the entities in the Group
have any external borrowings. The Group does not use interest rate forward contracts and interest rate
swap contracts as part of its strategy.
The Group is exposed to interest rate risk on financial assets as entities in the Group hold money market
deposits at floating interest rates. The risk is managed by fixing interest rates for a period of time when
indications exist that interest rates may move adversely.
The Group’s exposure to interest rates on financial assets and financial liabilities are detailed in the liquidity
risk section below.
Interest Rate Sensitivity Analysis
The sensitivity analysis below has been determined based on exposure to interest rates for non-derivative
instruments at the balance sheet date. A 0.5% increase or decrease is used when reporting interest rate
risk internally to key management personnel and represents management’s assessment of a reasonably
possible change in interest rates.
If interest rates earned on money market deposits had been 0.5% higher / lower and all other variables
were held constant, the Group’s:
•
profit for the year ended 31 December 2024 would increase by $372,385 in the event of 0.5% higher
interest rates and decrease by $372,385 in the event of 0.5% lower interest rates (profit for the year
ended 31 December 2023 would increase by $141,000 in the event of 0.5% higher interest rates and
decrease by $141,000 in the event of 0.5% lower interest rates). This is mainly attributable to the
Group’s exposure to interest rates on its money market deposits; and
•
other equity reserves would not be affected (2023: not affected)
Interest payable on the Group’s liabilities would have an immaterial effect on the profit or loss for the year.
Liquidity Risk
The Group’s objective throughout the year has been to ensure continuity of funding. Operations have
primarily been financed through revenue from Ukrainian operations.
The table below shows liabilities by their remaining contractual maturity. The amounts disclosed in the
maturity table are the contractual undiscounted cash flows including future interest. Such undiscounted
cash flows differ from the amount included in the statement of financial position because the statement of
financial position amount is based on discounted cash flows and does not include the interest that will be
accrued in future periods.
106
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
When the amount payable is not fixed, the amount disclosed is determined by reference to the conditions
existing at the reporting date. Foreign currency payments are translated using the spot exchange rate at
the end of the reporting period. The maturity analysis of financial liabilities as at 31 December 2024 is as
follows:
As at 31 December
2024
On demand
and less than
1 month
From 1
to
3 months
From 3 to
12 months
From
12 months
to 5 years
More
than 5
years
Total
$000
$000
$000
$000
$000
$000
Liabilities
Trade payables
315
-
-
-
-
315
Lease liabilities
4
9
37
58
156
264
Other non-current
liabilities
-
18
-
92
112
222
Total future
payments, including
future principal and
interest payments
319
27
37
150
268
801
The maturity analysis of financial liabilities as at 31 December 2023 is as follows:
As at 31 December
2023
On demand
and less than
1 month
From 1 to
3 months
From 3 to
12 months
From
12 months
to 5 years
More than
5 years
Total
$000
$000
$000
$000
$000
$000
Liabilities
Trade and other
payables
2,311
-
307
-
-
2,618
Lease liabilities
54
110
515
1,064
383
2,126
Other non-current
liabilities
-
-
-
102
143
245
Total future payments,
including future
principal and interest
payments
2,365
110
822
1,166
526
4,989
Details of the Group’s cash management policy are explained in Note 22.
Liquidity risk for the Group is further detailed under the Principal Risks section above.
Credit Risk
Credit risk principally arises in respect of the Group’s cash balance. For balances held outside Ukraine,
where $16,368,991 of the overall cash and cash equivalents is held (31 December 2023: $20,695,000), the
Group only deposits cash surpluses with major banks of high quality credit standing (Note 22). As at
31 December 2024, the remaining balance of $83,028,813 of cash and cash equivalents was held in
Ukraine (31 December 2023: $55,786,000 of cash and cash equivalents was held in Ukraine). As at 31
December 2024, Standard & Poor’s affirmed Ukraine’s sovereign credit rating of ‘CCC’, Outlook Negative.
There is no international credit rating information available for the specific banks in Ukraine where the
Group currently holds its cash and cash equivalents.
The Group has taken steps to diversify its banking arrangements between a number of banks in Ukraine
and increased the quality of cash placed with UK and European banking institutions. These measures are
designed to spread the risks associated with each bank’s creditworthiness. Management considers the
credit risk to be immaterial.
107
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Interest Rate Risk Profile of Financial Assets
The Group had the following cash and cash equivalent balances which are included in financial assets as
at 31 December with an exposure to interest rate risk:
Currency
Total
Floating
rate
financial
assets
Fixed
rate
financial
assets
Total
Floating
rate
financial
assets
Fixed
rate
financial
assets
2024
2024
2024
2023
2023
2023
$000
$000
$000
$000
$000
$000
Euros
247
247
-
249
249
-
British Pounds
171
171
-
116
116
-
Ukrainian Hryvnia
83,026
-
83,026
55,787
-
55,787
US Dollars
15,954
15,954
-
20,341
20,341
-
99,398
16,372
83,026
76,493
20,706
55,787
Cash deposits included in the above balances comprise term deposits with maturity less than 3 months of
$33,303,000 (2023: term deposits with maturity less than 3 months of $21,620,000).
As at 31 December 2024, cash and cash equivalents of the Company of $16,199,000 were held in
US Dollars and Euros at a floating rate (2023: $20,695,000).
Interest Rate Risk Profile of Financial Liabilities
As at 31 December 2024 and 2023, the Group had no interest bearing financial liabilities.
Borrowing Facilities
As at 31 December 2024 and 2023, the Group did not have any borrowing facilities available to it.
Fair Value of Financial Assets and Liabilities
The fair value of all financial instruments is not materially different from their book value.
30. Contingencies and Commitments
Amounts contracted in relation to the Group’s 2024 investment programme in the MEX-GOL, SV, VAS and
SC fields in Ukraine, but not provided for in the financial statements at 31 December 2024, were $0 related
to Oil and Gas Exploration and Evaluation assets and $461,587 related to Oil and Gas Development and
Production assets (2023: $118,000 related to Oil and Gas Exploration and Evaluation assets and $597,000
related to Oil and Gas Development and Production assets).
31. Related Party Disclosures
Key management personnel of the Group are considered to comprise only the Directors. Details of
Directors’ remuneration are disclosed in Note 7.
108
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
During the year, Group companies entered into the following transactions with related parties who are not
members of the Group:
Total
LLC
Smart
Energy
Other
Total
LLC
Smart
Energy
Other
2024
2024
2024
2023
2023
2023
$000
$000
$000
$000
$000
$000
Sale of goods/services
20
13
7
19,409
19,408
1
Purchase of goods/services
824
258
566
689
306
383
Amounts owed by related parties
13
9
4
1
-
1
Amounts owed to related parties
73
3
70
48
10
38
All related party transactions were with subsidiaries of the ultimate Parent Company, and primarily relate
to the sale of gas (see Note 4 for more details), the rental of office facilities and a vehicle and the sale of
equipment. The amounts outstanding were unsecured and will be settled in cash.
As at the date of this report, none of the Company’s controlling parties prepares consolidated financial
statements available for public use.
32. Post Balance Sheet Events
The ongoing war in Ukraine means that the fiscal, economic and humanitarian situation in Ukraine is
unstable and extremely challenging and the final resolution and consequences of the ongoing war are hard
to predict, but they may have a further serious impact on the Ukrainian economy and business of the Group.
Management continues to identify and mitigate, where possible, the impact on the Group, but the majority
of these factors are beyond their control, including the duration and severity of war, as well as the further
actions of various governments and diplomacy.
On 15 November 2024, the State Geologic and Subsoil Survey of Ukraine (the “SGSS”) issued orders
suspending the MEX-GOL, SV and VAS production licences for a period of ten years effective from 8
October 2024. Following the issuance of such orders, the Group commenced legal proceedings in Ukraine
to challenge such orders, and within those proceedings, obtained interim rulings to lift the suspensions of
those production licences, thereby allowing resumption of production from such licences. However, the
SGSS successfully appealed against the interim rulings, and as a result, the suspension of the MEX-GOL
and SV licences was reinstated on 22 January 2025, and the suspension of the VAS licence was reinstated
on 27 February 2025. Accordingly, there is currently no operational activity on any of the MEX-GOL, SV or
VAS licences. The Group is consulting with its legal advisers in order to determine appropriate actions to
protect its legal rights in relation to the above regulatory actions by the Ukrainian authorities.
33. Auditor’s Limitation Liability Agreement
It is proposed that an Auditor’s Limitation of Liability Agreement in respect of the financial year ended 31
December 2024 between the Company and Zenith Audit Ltd will be entered into following shareholders
approval being obtained at the next Annual General Meeting of the Company. The principal terms and
conditions of such Agreement are set out below:
- The Agreement limits the amount of any liability owed to the Company by the Auditor in respect of any
negligence, default, breach of duty or breach of trust, occurring in the course of the audit of the
Company's financial statements for the year ended 31 December 2024, for which the Auditor may
otherwise be liable to the Company.
- The Agreement also stipulates the maximum aggregated amount payable in event of any of the
circumstances stated above.
109
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Corporate Information
Company Secretary and Registered Office
Chris Phillips
84 Brook Street
London W1K 5EH
United Kingdom
Independent Auditor
Zenith Audit Ltd
1st Floor
18 Devonshire Row
London EC2M 4RH
United Kingdom
Nominated Adviser
Strand Hanson Limited
26 Mount Row
London W1K 3SQ
United Kingdom
Broker
Zeus Capital Limited
125 Old Broad Street
London EC2N 1AR
United Kingdom
PR Adviser
Citigate Dewe Rogerson
8th Floor
Holborn Gate
26 Southampton Buildings
London WC2A 1AN
United Kingdom
Solicitors
Squire Patton Boggs (UK) LLP
60 London Wall
London EC2M 5TQ
United Kingdom
Share Registry
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
United Kingdom
110
Enwell Energy plc - Annual Report and Financial Statements for the year ended 31 December 2024
Glossary
AAPG
American Association of Petroleum Geologists
Arkona
LLC Arkona Gas-Energy
bbl
barrel
bbl/d
barrels per day
Bm3
thousands of millions of cubic metres
boe
barrels of oil equivalent
boepd
barrels of oil equivalent per day
Bscf
thousands of millions of scf
Company
Enwell Energy plc
D&M
DeGolyer and MacNaughton
€
Euro
Group
Enwell Energy plc and its subsidiaries
km
kilometre
km2
square kilometres
LPG
liquefied petroleum gas
MEX-GOL
Mekhediviska-Golotvshinska
m3
cubic metres
m³/d
cubic metres per day
Mboe
thousand barrels of oil equivalent
Mm³
thousand cubic metres
MMbbl
million barrels
MMboe
million barrels of oil equivalent
MMm3
million cubic metres
MMscf
million scf
MMscf/d
million scf per day
Mtonnes
thousand tonnes
%
per cent.
QCA Code
Quoted Companies Alliance Corporate Governance Code 2018
QHSE
quality, health, safety and environment
SC
Svystunivsko-Chervonolutskyi
scf
standard cubic feet measured at 20 degrees Celsius and one
atmosphere
SPE
Society of Petroleum Engineers
SPEE
Society of Petroleum Evaluation Engineers
SV
Svyrydivske
Tscf
trillion scf
$
United States Dollar
UAH
Ukrainian Hryvnia
VAS
Vasyschevskoye
VED
Vvdenska
WPC
World Petroleum Council