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Europa Oil & Gas (Holdings) plc
Annual Report and
Financial Statements 2022
Who we are
Europa Oil & Gas (Holdings) plc
is an AIM-quoted exploration
and production company focused
on building a balanced portfolio
of producing, appraisal and
exploration assets in the UK,
Atlantic Ireland and Morocco
with minimal emissions, whilst
also looking to repurpose legacy
UK wells for geothermal energy
generation.
What we do
1Transformational progress in operations
2Strong prospects for future growth
Read more on page 02
Read more on page 10
3Security of supply for the UK
Read more on pages 18 to 19
Cover photo: Wressle production facilities
4Helping reach net zero goals by proving
local supply and reducing imports
Read more on page 19
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022
Strategic Report
Governance
Financial Statements
Strategic Report
Financial Statements
4 Who we are
02 Financial and operational
highlights
04 At a glance
06 Investment case
08 Chairman’s statement
10 Our strategy
12 Sustainability
16 Operational review
18 Our market
20 Risks and uncertainties
22 Section 172
23 Engaging with our stakeholders
38 Independent auditor’s report to
the members of the Europa Oil
& Gas (Holdings) plc
45 Consolidated statements of
comprehensive income
46 Consolidated statement of
financial position
47 Consolidated statement of
changes in equity
48 Company statement of financial
position
49 Company statement of changes
in equity
50 Consolidated statement of cash
Governance
flows
51 Company statement of cash flows
52 Notes to the financial statements
To find out the most
up-to-date information,
visit our website:
www.europaoil.com
24 Chairman’s introduction to
governance
30 Audit Committee report
31 Remuneration Committee report
32 Nominations Committee report
32 Strategy Committee report
33 ESG Committee report
34 Board of Directors
36 Directors’ report
37 Statements of Directors’
responsibilities
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022
1
Financial and operational highlights
Our 2022 performance
Europa Oil & Gas (Holdings) plc, the AIM-quoted UK,
Ireland and Morocco focused oil and gas exploration,
development and production company, announces its
final audited results for the 12-month period ended 31
July 2022.
Financial performance
Revenue
(£m)
Net cash generated in operating activities
(£m)
£6.6m
2022
2021 1.4
2020
1.2
6.6
£2.5m
2022
2021
*(0.5)
2020
(0.8)
* Used in operations
Pre-tax profit
(£m)
Cash balance
£1.4m
£8.3m
2021 (0.85)
2020
(5.4)
2022
1.4
2022
2021
2020
0.9
0.8
2.5
(£m)
8.3
The 2021/2022 period has seen
significant change at Europa and this is
clearly demonstrated in our numbers.
Revenue from operating activities has
quadrupled and net cash generated
for the period is £2.5 million, resulting
in a healthy balance sheet on which
to continue to execute on our stated
strategy of building a more balance
portfolio of assets.
Wressle continues to perform above expectations and
further development activities to increase production through
implementing a gas solution and drilling the Penistone horizon
within the Wressle field are planned over the next 12-18 months.
In addition, we plan to drill the Broughton North prospect, which
is a Wressle lookalike and can be produced through the existing
infrastructure at Wressle.
We will also continue to seek new appraisal opportunities to add
to our portfolio. The Serenity appraisal well was disappointing, but
the data that we have acquired will help optimise the development
of the field and the funds spent on the appraisal well will now go to
offset our exposure to the Energy Profits Levy.
Our assets all supply (or will supply when in production) local
markets and as such help to satisfy local demand for hydrocarbons
with minimal total emissions. This is epitomised by our Inishkea
exploration prospect offshore Ireland, which could be tied into
the existing infrastructure at Corrib and has the potential to meet
Ireland’s domestic retail demand for the next 17 years. This would
displace imported gas and significantly reduce the emissions
associated with Irelands gas consumption.
These are exciting times for Europa with plenty of operational
activities that can all deliver additional shareholder value whilst
we simultaneously continue to build on our asset base.
Simon Oddie
Chief Executive Officer
2
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Operational highlights
Onshore UK
Offshore UK
163%
Net production increases
163% to 245 bopd following
excellent Wressle performance
(2021: 93 bopd)
25%
Acquisition of a 25% interest
in the Serenity discovery in
the North Sea
• First oil at Wressle achieved in January 2021
• In March 2022, we announced the
» Post proppant squeeze gross
production rates of 500 bopd increased
throughout the period to over 750 bopd
» Net share of Wressle production at
597 bopd equates to 179 bopd
(Europa 30% interest)
» With an estimated break-even oil
price (excluding Europa’s corporate
overheads) of US$16.1 per barrel,
Wressle production is highly profitable
at current oil prices
» Further resources in the Wingfield Flags
and Penistone Flags reservoirs are
being planned for development and
have the potential to materially increase
net reserves
» Gas monetisation project under
development with potential for
significant oil production gains as
a result
• Total net production of 245 boepd was
produced from Europa’s UK onshore
fields during the year with Wressle
contributing roughly three quarters of
this and the remainder coming from the
three older fields
• CausewayGT and geothermal project
partner Baker Hughes identified Europa’s
West Firsby oil field in the East Midlands
as a potential candidate for developing a
closed-loop geothermal system
proposed farm-in to the Serenity appraisal
well from i3 Energy plc which involved
acquiring a 25% interest by paying 46.25%
of the cost of the well
• This was accompanied by a successful
equity raise of £7 million at a price of 1.8
pence per share
• This fulfilled the Company’s promised goal
of adding an appraisal asset to the Europa
portfolio and is in line with our long-term
strategy to create a balanced portfolio of
high-quality assets
Offshore Ireland
Lower risk / very high reward
infrastructure-led exploration in
proven gas play in the Slyne Basin
• Farm-out initiative is continuing on
100%-owned Licence FEL 4/19 which
holds the flagship 1.5 tcf Inishkea prospect
adjacent to existing infrastructure at the
producing Corrib gas field
• Completed all work commitments for the
first phase of the licence
Morocco
Farm-out of Inezgane licence
in the Agadir Basin
• Europa has a 75% interest in Inezgane and
operatorship of the licence covering an
area of 11,228 km2
• Future potential for West Firsby to continue
delivering revenue and for additional
well stock to be repurposed to generate
emission-free geothermal energy, directly
in line with the Company’s ESG strategy
• Inezgane represents a high-impact
exploration opportunity in a highly
underexplored area of the world –
complementing Europa’s strategy of
building a balanced portfolio of assets
• Recent evaluation identified a significant
volume of unrisked recoverable resources,
in excess of 1 billion barrels (oil equivalent),
in the top five ranked prospects alone
• Morocco offers an attractive investment
opportunity with excellent fiscal terms.
Several major and mid-cap companies
already hold acreage there, including ENI,
Hunt and Genel
• One-year extension to initial phase of the
licence to November 2022 granted to allow
for time lost as a result of Covid-19
• Farm-out exercise has continued
throughout the year
Board
• Appointment of Will Holland as CFO and
Executive Director in June 2022
Post reporting period events
(£2 million below budget, net
to Europa)
• The Serenity appraisal well commenced
drilling in September and was completed in
early October. The well did not encounter
any oil-bearing sands but has provided
valuable technical data and furthered our
understanding of the field. The Company
in conjunction with operator i3 Energy is
currently assessing development options
for the field
• The net cost to Europa of the Serenity well is
forecast to be £4.8 million (£2 million below
budget net to Europa), which is expected
to provide tax relief against the Energy
Profits Levy (Windfall Tax) on the Company’s
profits generated from its ongoing onshore
production
• Consent granted by the Irish authorities to
extend the first phase of licence FEL 4/19 to
31 January 2024
• The extension will enable further technical
work and allow more time to secure
a partner to advance development of
the licence
• On 8 September 2022 the Company
entered into a loan agreement with Union
Jack Oil plc (“UJO”). The key features of
the loan were: £1 million loan amount,
18-month term, interest rate of 11% per
annum, repayable at any point during the
term without penalty and secured against
10% interest in the Wressle field (PEDL180,
and PEDL182). The loan was to provide
additional liquidity during the drilling of
the Serenity appraisal well. The loan was
repaid in full on 18 October 2022
3
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report At a glance
A balanced portfolio of production,
appraisal and exploration assets
Our portfolio
We have a diverse portfolio of
hydrocarbon assets at various stages
of the development cycle including
exploration and production.
Read more on pages 16 and 17
Serenity
Inishkea prospect
1.5tcf
Potential gas from Inishkea
prospect
Key
Production
Exploration
Appraisal
Development
4
Wressle
750 bopd
Barrels per day delivered from site
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Investing in domestic
Delivering for
Experienced team
energy to solve a
global problem
Europa’s objective is to participate actively
in the global energy transition to sustainable
renewables by being a preferred partner
for domestic supply of hydrocarbons as
this transition takes place. By being a good
custodian of the hydrocarbon resource
and developing assets that are in areas
of demand, Europa provides a valuable
resource where it is needed and as such
helps minimise the total emissions associated
with consuming hydrocarbons.
The UK Government recognises that
delivering a low-carbon future will be
achieved by protecting infrastructure
already present in the UK Continental Shelf
through continued activity. Hydrocarbons
are considered a key pillar of the UK
Government’s Energy Security Strategy, with
domestic production of oil and gas projects
continuing to garner strong support.
Equally, Ireland is well positioned to utilise
its existing gas infrastructure in order to
minimise the total emissions associated
with its energy consumption by targeting
domestic exploration opportunities and
prioritising these above gas imports.
Our balanced portfolio of onshore and
offshore UK and Ireland hydrocarbon assets
at various stages of the development
cycle, including production and appraisal,
ensures that Europa remains well-placed
to deliver affordable energy, and we will
continue to explore potential development
and exploration opportunities to expand our
diverse asset portfolio.
Read more about our operations on
pages 16 and 17
our stakeholders
Europa is committed to creating stakeholder
value by building a balanced portfolio of
exploration, appraisal and production assets
in the UK, Atlantic Ireland and Morocco.
With a focus on domestic supply with minimal
emissions, we will continue to evaluate and
acquire quality UK and North Sea assets
wherever they become available, provided
that these can be acquired and developed
on acceptable commercial terms and within
the transition context.
Shareholders
Government regulators
Europa is led by a highly experienced Board
and management team with an extensive
knowledge of the oil and gas sector and
a proven track record of project monetisation,
focused on generating substantial
shareholder value.
Revenue
£6.6m
380%
£2.5m
Net cash generated by
operating activities
Increase in revenue from 2021
Joint venture partners
Read more about our Board members
on pages 34 and 35
Suppliers and advisers
Local community
Read more about our engagement
channels on page 23
Field prospect
Operator
Country
UK
Area
East Midlands
Licence
DL 003
DL 001
PL 199/215
PEDL180
PEDL181
PEDL182
PEDL299
PEDL343
Central North Sea
P.2358, BLOCK
West Firsby
Crosby Warren
Whisby-4
Wressle
Broughton North
Hardstoft
Cloughton
Serenity
Ireland
Morocco
Slyne Basin
FEL 4/19
Inishkea, Corrib North
Agadir Basin
Inezgane
Falcon & Turtle
Europa
Europa
BPEL
Egdon
Europa
Egdon
Ineos
Egdon
i3
Europa
Europa
Equity
100%
100%
65%
30%
50%
30%
25%
40%
25%
100%
75%
Status
Production
Production
Production
Production
Exploration
Exploration
Exploration
Exploration
Appraisal
Exploration
Exploration
5
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report
Investment case
Four reasons to invest
2Pivotal role in the UK’s energy transition
Hydrocarbons are considered a key pillar of the UK
Government’s Energy Security Strategy, with domestic
production of oil and gas projects continuing to garner
strong support.
Significantly, the UK Government is committed to providing
additional investment for the North Sea industry, where Europa
has farmed-in to the Serenity block. The UN has forecast a global
oil supply gap during transition to net zero and finding additional
domestic reserves is essential to reducing UK imports and global
emissions, providing greater accountability and transparency
of emissions to accelerate net zero.
Governments and environmental groups alike agree that a key
part to helping achieve net zero goals is to increase domestic
supply which minimises transportation emissions, and the gas
liquification emissions, associated with importing hydrocarbons.
2050
Target for net zero carbon emissions
ESG Committee and strategy in action
4Opportunities to develop new projects
The Board and management team at Europa have a history
of successfully identifying and monetising new upstream
opportunities and, with a robust balance sheet and ongoing
cash generative production, the Company is ideally placed
to continue to seek and acquire further assets. The strategic
acquisition focus is on assets that contribute to domestic supply
and those that utilise existing infrastructure.
26.1bn boe
Total opportunity of the North Sea,
as calculated by the NSTA
1Balanced and diverse portfolio
of producing, appraisal and
exploration assets
Europa is well placed to continue its production, development,
appraisal and exploration of existing onshore and offshore
UK assets, alongside the Company’s projects in Ireland and
Morocco. The Company is committed to continuing to build on its
asset portfolio by adding further appraisal opportunities that can
drive shareholder value in the near term.
245
Barrels of oil per day produced
throughout the period
$104.85/bbl*
Average crude oil price per barrel in 2022
* Source: www.statistica.com
As at September 2022
3Robust financial foundations providing
platform to explore additional E&P
opportunities
With a healthy balance sheet and ongoing production that
generates profits which, due to ongoing investment, are largely
shielded from the Energy Profits Levy (Windfall Tax), Europa is
in a strong financial position to develop its existing assets
where necessary and build on the existing portfolio targeting
appraisal opportunities.
£6.6m
Revenue
£8.3m*
Cash
* Including £6.6m committed to Serenity and £0.3m to Inezgane
6
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Europa is committed to advancing the
development plan and consenting process
to enable production from the Penistone
Flags reservoir where gross mid-case
contingent resources of 1.5 million barrels
of oil and 2 billion cubic feet of gas have
been independently reported. In addition,
the Wressle partners are looking to drill a
Wressle lookalike prospect on the North
Broughton licence adjacent to Wressle. If
successful, this could be brought online
quickly and cost effectively.
Bolstered by the strong performance of
Wressle, Europa continues to explore
potential onshore UK development and
production opportunities to develop new
revenue streams, generating additional
value for shareholders whilst providing
the UK Government with further options to
increase its indigenous supply of energy,
a prominent concern given the prevailing
energy security crisis.
Stena Don, Serenity farm-in
Wressle
Wressle is our flagship
UK onshore asset,
situated in North
Lincolnshire, England.
The field was discovered in 2014 by
the Wressle-1 conventional exploration
well which intersected three productive
reservoir horizons. The oil discovery
straddles the PEDL180 and PEDL182
licences, and Europa holds a 30% stake
alongside Union Jack Oil (40%) and
operator Egdon Resources (30%).
Oil flow at Wressle commenced in Q1 2021,
and the oilfield has consistently performed
above expectations, generating high levels
of production and revenues. Wressle
remains on track to become the second
most productive conventional producing
onshore oilfield in the UK behind the prolific
Wytch Farm in Dorset.
Aimed at increasing Wressle’s value and
complementing the field’s strong existing
output, Europa has developed the Field
Development Plan alongside joint venture
partners Egdon Resources and Union
Jack Oil. The plan was approved by the
North Sea Transition Authority (“NSTA”)
in May 2022, ensuring that the Wressle
project moved from an extended well test
to production.
Wressle wellhead
Serenity farm-in
In April 2022,
Europa announced
the signature of the
Serenity farm-in
agreement with i3E in
respect of UK Seaward
Production Licence
P.2358, Block 13/23c,
subject to approval
of the NSTA to the
creation of a new block
within Licence P.2358
and to assignment
of an interest in the
Licence and New
Serenity Block to
Europa.
Following NSTA approval in August
2022, Europa acquired a 25% interest
in the Central North Sea prospect.
Europa is paid 46.25% of the appraisal
well cost, equating to a 1.85 to 1 carry.
The well was drilled in October for
a net cost to Europa of £4.8 million,
but unfortunately did not encounter
oil-bearing sands. However, the well
did significantly improve the sub-
surface understanding of the Serenity
structure and Europa, with its partner
i3E, is currently evaluating monetisation
routes for the oil encountered in the
discovery well. Serenity is strategically
located near existing infrastructure in the
North Sea and a cost-effective tieback
could be the preferred development
solution once all options have been fully
assessed.
The Serenity farm-in was in line with
Europa’s overarching strategy to acquire
an appraisal asset, adding to its existing
producing and high impact exploration
assets, and thereby creating a more
balanced asset portfolio for its investors.
Read more about our Serenity
operations on page 16
7
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report Chairman’s statement
Progressing a new phase
in our growth trajectory
“Looking
forward, we are
excited about
undertaking further
development on
the Wressle field
with a planned gas
project unlocking
further upside
potential for oil
production rates
from the field.
market the gas contained within the reservoir,
with various monetisation options being
considered including gas to power and a
short pipeline (approximately 600 metres)
into the local gas distribution network. Once
a gas monetisation solution is in place, the
well will be able to produce at unrestricted
oil rates which will materially impact the cash
flows associated with the field. This will also
allow the field to be further developed by
targeting the contingent resources located
in the Penistone Flags reservoir and the
Broughton North prospect which is a Wressle
lookalike.
We continue to develop our strategy of
contributing to the clean energy transition
in the UK following the Memorandum of
Understanding (“MOU”) we signed with
Causeway Geothermal in June 2021. The
collaboration will explore utilising existing
infrastructure and wells for geothermal
applications at West Firsby to deliver clean,
reliable and cheap sources of heat. Studies
will determine if commercial deployment
of geothermal technologies are viable at
the site. We have the potential to convert
onshore legacy oilfields into sources of clean
and reliable energy forms as part of our
ESG strategy and Europa’s stated desire to
participate in the national energy transition.
A successful project would deliver long-
term benefits to our shareholders, the UK’s
national energy grid and the local community
in West Firsby.
The financial year
2021/22 has been an
exceptionally busy period
for Europa and positions
the Company very
strongly for the future.
Despite the ongoing Covid-19 pandemic,
the onset of war between Russia and Ukraine,
and continuing global economic volatility,
the period delivered outstanding operational
results for Europa. Our onshore UK Wressle
oilfield came onstream in January 2021 and
has continued to outperform expectations.
It has been the backbone of our production
where our total average net rate for the
period is 245 bopd, boosting revenues and
strengthening our balance sheet.
As well as our onshore operational success
at Wressle, we also farmed into the Serenity
field offshore UK, taking a 25% interest in the
Serenity oil discovery operated by i3 Energy
(“i3E”). The appraisal well was disappointing
and did not encounter oil-bearing sands;
however, together with our partner i3E, we
are assessing the various development
options to bring the field into production.
Looking forward, we are excited about
undertaking further development on the
Wressle field with a planned gas project
unlocking further upside potential for oil
production rates and gas sales from the
field. This could add an additional 50% to
oil production rates, further boosting
Europa’s revenues. We continue to
investigate the potential of the West Firsby
field as a geothermal production site,
providing a future role for our mature oil
fields. Within our offshore Ireland acreage,
the Inishkea prospect alone has potential
to entirely satisfy the Irish domestic retail
gas requirements for the next 17 years, and I
am delighted that our application to extend
the first phase of the licence to 31 January
2024 has been granted. This will enable us
to continue with our technical studies and
provide more time to find a project partner
for FEL 4/19.
Onshore UK
The past year has seen Europa’s net oil
production increase materially thanks to the
proppant squeeze operation at our fourth
onshore field, Wressle, in the West Midlands.
Following the successful execution of the
field development plan in 2020/21, which
included the safe completion of operations
to recomplete the Wressle-1 well, followed
by the reperforation of the Ashover Grit
reservoir interval and the proppant squeeze,
Wressle hit an initial gross production rate
in August 2021 of over 500 bopd gross,
exceeding the pre-operations target.
Following upgrades to the production
facilities, these initial flow rates continued to
grow, reaching the current rate of 700-750
bopd, or net 210-225 bopd to Europa. At
current oil prices, this is having a materially
positive impact on our balance sheet.
At the moment, oil production is constrained
by the limits imposed on the incineration
of gas from the field of ten tonnes per day.
However, alongside our partners we plan to
8
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Offshore UK
Europa moved into the UK offshore arena by
farming into the Serenity field in the Central
North Sea. In March 2022, we announced
that we were acquiring a 25% interest in the
Serenity oil discovery operated by i3E, which
was funded by a highly successful equity raise
of £7 million.
Unfortunately, the appraisal well encountered
water-wet sands but that data from the well
has significantly improved our understanding
of the field as a whole and we are now
working to optimise the development of the
field, which may include a tie-back to existing
infrastructure.
Offshore Morocco
We continue to work on the proposed farm-
out of the Inezgane offshore permit located
in the Agadir Basin in Morocco. Europa has
a 75% interest in Inezgane and operatorship
of the licence covering an area of 11,228 km2.
Inezgane represents a high-impact exploration
opportunity in an underexplored area of the
world and our recent evaluation identified a
significant volume of unrisked recoverable
resources.
Offshore Ireland
Offshore Ireland, the Company’s focus remains
on its gas interests in the Irish Atlantic located
in close proximity to the already producing
Corrib gas field. The Company has completed
all work commitments for the first phase
of its 100%-owned FEL 4/19 licence, and in
March 2022 applied to the Department of the
Environment, Climate and Communications
(“DECC”) for an extension to the first phase
in order to carry out further technical studies
and allow more time to secure a farm-out of
the licence. The application to extend the
licence to 31 January 2024 was granted on 2
November 2022.
FEL 4/19 contains the large, low risk, Inishkea
gas prospect and is a strategic asset that can
potentially provide a reliable source of low
emission energy for Ireland and play a key role
in the transition to renewable green power.
A successful discovery at Inishkea could
satisfy the Irish domestic retail gas demand
for the next 17 years. Gas from the Corrib field,
adjacent to the Inishkea prospect, is one of
the lowest carbon-intensity gases in Europe,
much lower than long distance pipeline gas
from Norway, the UK or the Russian gas
previously piped to Europe. Given that Ireland
will continue to require gas into the foreseeable
future, having recently agreed plans to build
new gas-powered electricity plants, it makes
sense to keep this potentially valuable source
of indigenous gas available. We are therefore
delighted that the requested licence extension
was granted, which will allow the Company to
carry out further technical studies and seek a
project partner.
Board changes
This past year we have seen one major
change at senior management and board
level with the appointment of Will Holland as
permanent CFO in June 2022. Will brings
a wealth of corporate, financial and M&A
experience in the upstream sector that will
be of crucial importance as we continue to
grow the business, and I look forward to
working with him at this very exciting time for
the Company.
Conclusion and Outlook
The Company has been very active during
this financial year and we are starting to reap
the rewards of executing on our strategic
vision. We have strong cash flows from our
onshore production, further development
opportunities at Wressle and Serenity
as well as material upside potential with
our exploration assets. The oil price has
remained strong and traded above $100/
bbl for much of the period resulting in record
cash flow for Europa.
Our stated goal to add further appraisal
assets to the portfolio resulted in the Serenity
farm-in announced in March. Although the
subsequent appraisal well was disappointing,
it has provided us with valuable sub-surface
data that will be incorporated into our
reservoir model and we look forward to
working with i3E on how best to develop
the existing discovery. The Board continues
to believe that the Company would benefit
from further appraisal and early development
projects in our portfolio and supported by
our strong cash flows we will continue to
seek opportunities to acquire these types
of assets. Our aim remains to engage in
potentially high reward activity without
putting the Company’s balance sheet at risk.
Having come through the Covid-19
restrictions we have opened a new London
office from where we will continue to develop
our existing assets and grow the portfolio.
The hydrocarbons that we produce and
new fields that we develop all contribute
to supplying the domestic demand of their
local regions and as such displace imported
hydrocarbons and reduce the emissions
associated with hydrocarbon consumption.
This strategy to supply local demand will
continue to drive our activities as we focus
on growing our existing portfolio both
organically and via acquisitions which may
add to our existing assets to create a more
balanced portfolio.
Finally, on behalf of the Board, I would like
to thank the management, employees and
consultants for their hard work on behalf of
our shareholders and stakeholders during
the past year. We have achieved a lot and
will continue to build on the solid foundations
that we now have in place.
Brian O’Cathain
Non-Executive Chairman
11 November 2022
The opportunity
for Europa
The UK is a net
importer of oil and
gas with 88% of crude
oil and condensate
coming from Norway,
USA, Libya, Russia and
Nigeria in 2021[1]. Total
crude and refined oil
and gas imports in
2021 cost the UK £49.6
billion[2].
The UK intends to end imports of
Russian oil by end of 2022[3] and the
North Sea Transition Authority is working
closely with industry on improving
security of supply while also ensuring
emission reduction targets are met[4].
At present, the UK reliance on Norway
is high, accounting for 50% of the UK’s
crude oil and gas imports[2]. This is set
to increase should there be limited
investment in new North Sea production
facilities[4] further increasing concerns
regarding energy security.
In 2021 total production and processing
GHG emissions intensity for the UK
Continental Shelf was ca. 30 kgCO2e/
boe[5]. Norwegian imports come with
a lower GHG emissions intensity of
ca. 18 kgCO2e/boe[6], largely due
to electrification of many platforms.
However, the imports making up the
remaining 50% have higher emissions
and can also be associated with lower
ESG credentials. The average GHG
emissions intensity of oil and LNG
imports from other countries ranges
between 50-140 kgCO2e/boe[7,8],
significantly higher than the 30 kgCO2e/
boe[5] UK average.
Sources on next page.
9
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report Our strategy
Building a balanced portfolio
Building a portfolio
of assets in established
basins with existing
infrastructure to
maximise value with
minimal emissions.
The North Sea
opportunity1
26.1bn
boe
Total opportunity value
According to the NSTA, within the
North Sea there are:
• 4.4 billion boe of 2P reserves
• 6.8 billion boe of discovered
undeveloped resources
• 3.7 billion boe of mapped
leads and prospects
• 11.2 billion boe estimated
unmapped resources
Where there is room for improvement
50%
The UK imports around 50% of its
gas from the international market[2]
Sources of UK gas imports
Sources of UK oil imports
(million tonnes)3
(million tonnes)3
Other
Other LNG
Russia LNG
USA LNG
Qatar LNG
Norway
(pipeline)
Libya
Netherlands
Russia
US
Norway
05
01 00 150 200 250 300 350 400
0
05
10
15
20
There is no treaty which regulates energy production
and exploration. This is governed by domestic laws
of each country.[4]
The average GHG emissions intensity of oil and
LNG imports from other countries ranges between
50-140 kgCO2e/boe5, significantly higher than
the 30 kgCO2e/boe6 UK average.
An increase in domestic production of oil and gas
would mean less reliance on imports, operating under
well-regulated domestic jurisdictions, and more
control over emissions.
Sources for text on previous page
1 https://www.eia.gov/international/analysis/country/GBR
2 https://www.ons.gov.uk/economy/nationalaccounts/
balanceofpayments/articles/trendsinukimportsandexportso
ffuels/2022-06-29#:~:text=Norway%20is%20typically%20
the%20UK’s,the%20United%20States%20and%20Russia.
3 https://www.gov.uk/government/news/uk-imposes-
sweeping-new-sanctions-to-starve-putins-war-machine
4 https://oeuk.org.uk/norway-is-now-uks-primary-gas-
supplier-and-declining-north-sea-output-means-uk-faces-
importing-80-of-its-gas-and-oil-within-a-decade-warns-
oeuk-report/
5 https://www.nstauthority.co.uk/media/8439/emr-2022-
final-v2.pdf
6 https://oeuk.org.uk/wp-content/uploads/woocommerce_
uploads/2022/10/OEUKs-Emissions-Report-2022-d3g68p.
pdf
7 https://www.nstauthority.co.uk/the-move-to-net-zero/
net-zero-benchmarking-and-analysis/natural-gas-carbon-
footprint-analysis/#gas_footprint
8 https://assets.researchsquare.com/files/rs-637584/
v1_covered.pdf?c=1631871330
Sources for text on current page
1 www.nstauthority.co.uk/media/7764/rr-report_final-22-
september-2021.pdf
2 https://www.ons.gov.uk/
economynationalaccountsbalanceofpaymentsarticles/
trendsinukimportsandexportsoffuels/202206-
29#:~:text=Norway%2is%20typically%2the%2UK’s,the%20
United%20States%20and%20Russia.
3 https://commonslibrary.parliament.uk/research-briefings/
cbp-9523/
4 https://www.wto.org/english/res_e/publications_e/wtr10_
forum_e/wtr10_11june10_e.htm
5 https://assets.researchsquare.com/files/rs-637584/
v1_covered.pdf?c=1631871330
6 https://www.nstauthority.co.uk/media/8439/emr-2022-
final-v2.pdf
10
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Strategy
Europa is focused on building a balanced
portfolio of producing, appraisal and
exploration assets in the UK, Atlantic Ireland
and Morocco.
We continue to work towards developing
significant value-accretive opportunities
and late-stage appraisal and development
projects whilst ensuring the Company
minimises risk.
Building a specific strategy to develop is a
dynamic process controlled by prevailing
commodity prices. Current oil and especially
gas prices are strong but these fundamentals
are challenging because they may be short
term whereas most petroleum projects are
more long term. This situation requires the
Europa executive team to constantly evaluate
mid- to long-term projects. Small companies
in the oil and gas industry are confronting
significant strategic challenges both political
and market driven and on a daily basis.
The frontier exploration strategy with some
local production paying the bills which was
previously pursued by Europa has been
modified to have a lower risk appraisal
strategy matching the current industry
demands and with a shorter time scale from
investment to production. With such a history
Europa still considers itself very much an
“E&P” company.
Recent high gas prices, and with gas
being a clean transition fuel, has made gas
opportunities attractive, especially those
located near the market. The less transport
and processing of the gas the greener the
credentials.
Smaller companies are facing challenging
times for expansion, projects are more
expensive and can be more technically
challenging, which pushes out the risk
envelope. Added to this, the equity markets
are tighter as many funds now choose not
to invest in the petroleum sector. As such,
smaller companies must find different ways
to grow by using their existing projects and
carefully selecting new ones to expand their
operations while maintaining profitability at
a time when regulation, environmentalism
and surprise taxes makes cash accumulation
for more capital-intensive projects more
challenging.
Smaller companies must strike a balance
between these challenges. Europa will
focus on projects where we can see a
competitive edge and where we can scale
up while at the same time pursuing value-
added diversification to ensure effective risk
management.
The Wressle discovery still has great
potential with undeveloped gas and further
possibilities for oil which will form the
foundation for a substantial business for the
immediate future.
Europa is a very experienced onshore
operator and for the time being intends to
be a non-operator offshore. However, the
many disciplines involved in the offshore
petroleum industry are available from very
competent service companies, which means
that opportunities to operate offshore could
still be considered.
For small E&P companies, access to finance
affects the rate of growth of the company.
Therefore all new opportunities must not
only satisfy our own rigorous technical
assessment but must also be able to attract
the necessary investment finance to appraise
and develop the asset.
Assets
We have a diverse portfolio of hydrocarbon
assets at various stages of the development
cycle including exploration and production.
North Sea
The UK Government has pledged to
accelerate all sources of domestic energy,
including North Sea oil and gas production,
and remains committed to providing
additional investment for the North Sea
region, where Europa has farmed into the
Serenity block.
Europa recognises the myriad of
opportunities that exist in the North Sea, and
continues to explore potential development
and appraisal projects to further diversify
its asset base and generate additional
shareholder value.
11
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report Sustainability
ESG Statement of Intent
Europa Oil & Gas is working to contribute to local
energy security and the global transition to a low
carbon economy while delivering value to all
stakeholders. The Company recognises that a wide
range of Environmental, Social and Governance
(“ESG”) topics form the basis of how it conducts its
business and operations. In order to achieve these
ambitions, Europa has started a rigorous process
to formalise its ESG strategy and ensure key ESG
principles are integrated into its everyday actions.
Environment
Social
Governance
“
Responsible
support for
local energy
security
“
Stakeholder
benefit, support
and equality
“
Ethical integrity
and diligent risk
management
We believe in acting as responsible
custodians of the physical spaces which
we occupy as a company, with the
utmost respect for the environment in
which we operate.
Europa commits to being fair and
inclusive in all our interactions with
our employees and partners, including
those communities with whom
we interact.
As an AIM-quoted entity Europa follows
all required reporting and corporate
governance guidelines. To go beyond
the minimum requirements, our ESG
Committee has oversight on the
integration of our ESG strategy with
our overall Company development
and activities.
12
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Building a solid
foundation
As an AIM-quoted company, Europa follows
the QCA Code for small to mid-size quoted
companies, as well as all regulations,
requirements and best practice guidance
given by the London Stock Exchange. More
detail on the governance structures that
support responsible management of the
Company can be found on pages 28 to 41.
As an operator and joint venture partner in the
oil and gas industry, Europa is subject to many
stringent regulatory requirements at local and
national levels. The Company has established
key policies and procedures to guide their
operations and diligently abides by all laws
and regulatory requirements applicable to its
business activities.
With a goal of going beyond the necessary
ESG-related requirements, at the end of 2021
the Europa Board formed an ESG Committee.
This has a key role in ensuring focused
discussion of ESG topics takes place at
regular meetings, and that the ESG principles
adopted by Europa are integrated into the
Company’s planning and wider strategy.
The ESG Committee’s first action was to
approve a project to review the Company’s
position, formalise its ESG strategy, and
develop a plan to further build on its
commitments over the coming years. This
project was kicked off in Q3 of 2022 and
will continue into 2023 with integration right
across the business.
Material topics
As a first step towards formalising Europa’s
ESG strategy, a Materiality Assessment was
conducted. This identifies the topics that
are material to the Company’s stakeholders
and its business. An internal review was
undertaken by the senior management
team using a list of topics from the Global
Reporting Initiative (GRI) 11: Oil and Gas
Sector 2021 guidelines as a basis.
The principle of Double Materiality was
applied when ranking each topic on a matrix
as per the diagram below. The process
followed initially looked at the importance
of each topic to Europa’s stakeholders and
within the physical environment in which they
operate. Secondly, the importance and risk
of each topic to the Europa business during
the current reporting period was considered.
It is noted that this Materiality Assessment
represents a snapshot in time, and some
topics are expected to change in importance
in the next two to three years as Europa’s
operations evolve. For example, ‘Closure and
Rehabilitation’ is not currently defined as a
material topic, but as planning and activities
for decommissioning of ageing assets
commences, this topic will become material
to Europa. The Company plans to review and
update the Materiality Assessment to reflect
the various developments that occur.
Through this process, nine key areas of
focus were identified and linked to relevant
UN Sustainable Development Goals. These
nine areas have been utilised to develop and
focus the Group’s ESG strategy to ensure it is
both representative and impactful.
What is a
Materiality
Assessment?
Conducting a Materiality Assessment
helps an organisation identify and
understand the issues that matter most
to both its stakeholders and its business
activities.
‘Double Materiality’ promotes a more
holistic assessment of an organisation’s
impacts by taking a dual perspective:
• an inside-out perspective on a
company’s impact on people and the
environment
• an outside-in perspective on how
ESG issues affects a company’s
performance and development
Identifying which topics are material to
an organisation and its stakeholders is a
good way to form a solid foundation for
building an impactful ESG strategy.
Important topics
Material topics
Local communities and
economic impacts
Non-discrimination
and equal opportunity
Water and waste
management
Climate adaption,
energy transition
and emissions
Health and safety,
asset integrity
Policy
engagement
Ecological
impact
Anti-corruption and
strong governance
Land and resource
rights
Freedom of association &
collective bargaining
Anti-competitive behaviour
Closure and rehabilitation
Impact on Europa’s business
13
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s
r
e
d
o
h
e
k
a
t
s
s
’
a
p
o
r
u
E
n
o
t
c
a
p
m
I
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report
Sustainability
Strategy and next steps
High-level ESG strategy
Europa has defined
a high-level strategy
centred around the
three ESG pillars of
Environment, Social
and Governance.
The Company has defined a series of goals
which represent its intents and ambitions
whilst delivering on its overarching goal of
“contributing to local energy security and
the global energy transition to a low carbon
economy to deliver value to all stakeholders.”
During the coming months, alongside a full
awareness of the emissions generated by
Europa, the next step in developing the
ESG strategy will focus on defining
performance metrics that align to each
of the identified goals. These will all relate
to and represent the nine material topics
identified in the Materiality Assessment.
This will ensure the Company has a clear
understanding of its performance against
the topics that are most important to its
activities and stakeholders, and enable
it to demonstrate continual improvement.
Environment
Social
Governance
Responsible support
for local energy
security
Stakeholder benefit,
support and equality
Ethical integrity
and diligent risk
management
Climate adaption, energy
transition and emissions
Health and safety
and asset integrity
Policy engagement
Water and waste management
Local communities and
economic impacts
Anti-corruption and strong
governance
Ecological impact
Non-discrimination and equal
opportunity
Land and resource rights
High-level strategy goals
• Contribute to local energy production
High-level strategy goals
• Prioritise safe operations
to reduce imports
• Minimise emissions wherever
possible
• Employ strong environmental
stewardship
• Support the global low carbon energy
transition
• Healthy workers and communities
• Create value for all stakeholders
• Actively work to address any
inequalities
High-level strategy goals
• Highest standards of ethics and
compliance
• Undertake responsible management
of risks
• Act as an engaged and supportive
partner
• Commitment to honesty and
transparency
14
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 As part of this process, the Company will
also investigate additional initiatives that
it can implement that will both reduce
negative impacts caused by its operations
and enhance positive contributions to the
environment and communities in which it
operates. Europa will build on the existing
initiatives already underway which include:
• Geothermal scoping study: Europa is
working with Causeway Geothermal (NI)
Ltd. to carry out studies to assess the
potential of Europa’s West Firsby field as a
test site for sustainable, clean geothermal
energy systems
• Plan towards zero flaring: Europa has used
its influence as a non-operating partner to
secure joint venture agreement to work
towards zero flaring at Wressle
• Community funds: Europa contributes to
community funds, which provide funding
and assistance to selected local charities,
good causes and initiatives in the local
East Midlands communities in which it is
active in the onshore UK
ESG reporting is currently a rapidly
evolving area with new frameworks under
development that are aiming to consolidate
and streamline multiple frameworks. Europa
is working to understand the various ESG
reporting frameworks and associated
regulatory requirements. During the next
year Europa will select the most appropriate
schemes and begin working towards
reporting against these disclosures to enable
transparent and honest reporting of its
activities to its stakeholders.
What are the
UN Sustainable
Development
Goals?
The 2030 Agenda for Sustainable
Development, adopted by all United
Nations Member States in 2015,
provides a shared blueprint for peace
and prosperity for people and the
planet, now and into the future.
At the heart of “Agenda 2030” are the
17 Sustainable Development Goals
(“SDGs”) which clearly define the world
we want — applying to all nations and
leaving no one behind.
They recognise that ending poverty and
other deprivations must go hand-in-hand
with strategies that improve health and
education, reduce inequality, and spur
economic growth – all while tackling
climate change and working to preserve
our oceans and forests.
Read more about the UN
Sustainable Development Goals
at https://sdgs.un.org/goals
Next steps to demonstrate
commitment to continual
improvement
The management and
Board of Europa Oil &
Gas are committed to
continually improving
its performance and
transparently reporting
its progress. The
Company will build
on this foundation by
defining a set of relevant,
measurable targets and
metrics that will enable
it to measure, track and
improve its performance
in relation to its material
topics.
Stakeholder
engagement
Europa recognises it has a wide variety
of stakeholders who require different
types of information, at different times,
and in different ways.
An overview of the Company’s
stakeholders and how it engages with
them is presented on page 23.
As part of building on its ESG strategy
and understanding the full impact of
its activities, Europa will expand its
stakeholder and supply chain mapping
to ensure a thorough understanding
of who is included in each stakeholder
group. The Company also commits
to regularly reviewing its methods of
engaging with its stakeholders to ensure
effective and timely communication.
15
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report Operational review
International overview
UK production:
East Midlands
UK development:
Wressle
UK appraisal:
Serenity
Europa produces oil from four UK oilfields:
Wressle, West Firsby, Crosby Warren; and
Whisby-4. Europa holds a 30% working
interest in licences PEDL180 and 182 which
hold Wressle and Broughton, alongside
Egdon Resources (operator, 30%), and Union
Jack Oil (40%). Consistent with the field
development plan, Wressle commenced
production on an extended well test in
January 2021 and by August 2021 achieved
gross rates of approximately 500 bopd,
or 150 bopd net to the Company. This
subsequently increased to 750 bopd gross
(225 bopd net), and gave an average over
the financial year of 179 bopd net to Europa,
an increase of 227% compared to the
previous year (55 bopd).
Whilst Wressle continues to produce
at elevated rates, our other three fields
are naturally declining, as expected.
Nevertheless, the three fields contributed 66
bopd net to Europa throughout the financial
period, which generated significant revenues
at the recent elevated oil prices. We continue
to investigate ways to improve recovery rates
at a number of wells on the fields including
potential workovers at the West Firsby field.
227%
Increase in net bopd production over
the financial year
Europa holds a 25% working interest in
the Serenity oil discovery, a development
opportunity that we farmed into in April
2022. Alongside Wressle, Serenity is a
potential engine of growth for Europa and
demonstrates the Company’s commitment
to developing a balanced portfolio of assets.
The spud of the Serenity appraisal well,
located in the Central North Sea, was
announced in September 2022, where the
well objective was to prove up additional
volumes of hydrocarbons beyond those
encountered in the original Serenity
discovery well in 2019 by i3E. Unfortunately,
the appraisal well encountered water-wet
sands but has improved our understanding
of the field. We are now working with i3E
to optimise the development of the field,
which could involve a tie-back to existing
infrastructure. The Serenity field will be
developed in line with the NSTA’s stated
strategy to ensure that the maximum
volumes of oil are recovered from the North
Sea in a manner that is compliant with the
Government’s aspirations of meeting its
net zero targets.
The Serenity farm-in marks a continuation
of Europa delivering on its stated strategy
of developing significant value accretive
opportunities and late-stage appraisal and
development projects whilst ensuring the
Company continues to minimise risk, and we
look forward to updating stakeholders on our
progress in due course.
25%
Working interest held by Europa
We have been delighted with the
performance of Wressle, our key onshore
producing asset, during the financial year.
The oilfield has significantly exceeded
expectations, with current gross production
rates of around 750 bopd roughly 50%
higher than initial gross rates. Moreover, we
see the potential for these rates increasing,
perhaps by a further 50% to around 1,200
bopd. This will be reliant on a successful
development of the associated gas that we
produce with Wressle’s oil. We are confident
that this will be achieved, with the help of our
partners in the field.
In May 2022, we were pleased that the
North Sea Transition Authority (“NSTA”)
approved the Field Development Plan for
the Wressle oilfield in North Lincolnshire,
held under licences PEDL180 and PEDL182
(the “Licences”), where Europa holds a 30%
interest. The NSTA has also approved the
Licences entering their production phase,
which will continue through to 2039.
Wressle continues to exceed our
expectations, generating high levels
of production and revenues, with the
Wressle-1 well currently amongst the most
productive in the onshore UK, producing
over 250 thousand barrels gross of oil to
date. Our next steps involve advancing the
development plan and consenting process
to enable production from the Penistone
Flags reservoir where gross Mid-case
Contingent Resources of 1.53 million barrels
of oil and 2 billion cubic feet of gas have
been independently reported, in addition to
progressing gas monetisation and continuing
to optimise oil and gas production from
the Ashover Grit reservoir. Leveraging the
knowhow and experience of our technical
team, we are set to capitalise on the
significant opportunities that exist at the field,
alongside our joint venture partners Egdon
and Union Jack Oil.
50%
Increase in gross production against
initial rates
16
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Exploration:
Offshore Ireland
Exploration:
Offshore Morocco
Since September 2019, Europa has held
a 75% working interest in the Inezgane
licence offshore Morocco. We have
conducted several technical studies of
the area, building up an extensive dataset
composed of 3D seismic reprocessing and
analysis, and extensive geological surveys.
Significantly, initial results of technical work
have identified 30 prospects and leads that
have the potential to hold in excess of one
billion barrels of unrisked oil resources,
demonstrating the sizeable potential of
the prospect.
In August 2021, we launched the farm-
out initiative of our Inezgane permit, as
Europa aims to attract a partner to advance
exploration activities. The prospect is situated
within a largely underexplored region,
representing a significant opportunity to farm
into a high potential exploration licence.
Unless Europa elects to enter into the next
phase of the licence, the licence will lapse
in November 2022.
75%
Working interest held by Europa since
September 2019
GT MOU
Europa’s
contribution to net
zero case study feature
In 2021, Europa entered into a MOU
with Causeway Geothermal and project
partner Baker Hughes to assess the
potential of the West Firsby oilfield
as a geothermal test and commercial
deployment project, representing
Europa’s first foray into renewables.
Our collaboration is progressing well, and
we continue to explore the possibility of
utilising existing infrastructure and wells
for geothermal applications to deliver
clean, reliable and affordable sources
of heat. A successful project will deliver
long-term benefits to our shareholders,
the UK’s national energy grid and the
local community in West Firsby.
Located offshore Ireland on the west coast is
Europa’s FEL 4/19 licence. A strategic asset
for Europa, FEL 4/19 contains the large, low
risk Inishkea gas prospect which has the
potential to facilitate the energy transition
and mitigate Ireland’s dependence on
energy imports, particularly vital amid the
current energy security crisis facing Europe.
Inishkea is situated adjacent to the Corrib
gas field, which was discovered in 1996
and has been producing one of the lowest
carbon-intensity gases in Europe since 2015,
much lower than long distance pipeline gas
from Norway or the UK. The exploration
licence’s position within the proven Slyne
Basin gas play, together with the increasing
need for countries to secure domestic
energy resources against the current
macroeconomic backdrop, underpins our
confidence in securing a partner to farm into
FEL 4/19 in the medium to long term.
We have completed all work commitments
for the first phase of the licence and, in
March 2022, Europa applied to Ireland’s
Department of the Environment, Climate and
Communications (“DECC”) for an extension
to the first phase in order to carry out further
technical studies and allow more time to
secure a project partner. The application
to extend the licence to 31 January 2024
was granted on 2 November 2022.
Ireland will continue to require gas in the long
term, with the nation having recently agreed
plans to build new gas-powered electricity
plants, and, therefore, it makes sense to keep
this potentially valuable source of indigenous
gas off the west coast available.
Via the development of our licence in the
Inishkea gasfield, Europa has the potential
to provide Ireland with a secure supply of
natural gas, leveraging existing infrastructure
from Corrib to increase the efficiency of
operations, minimise costs and reduce
transportation emissions.
1.5tcf
Potential gas from Inishkea prospect
17
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report Our market
Energy outlook
An overview of the key
factors that have an
impact on the energy
market, how they affect
the market, and what
these could look like
in 2023.
Government
Commodity prices
The Company operates
in well-regulated
jurisdictions that
govern the operational
activities that Europa
undertakes. In addition,
these governing bodies
issue licences, permits
and determine the
fiscal environment.
The regulatory bodies
in the UK and Ireland
have experienced
staff and well-defined
statutes, however the UK
exchequer has a record
of changing the fiscal
environment with oil
prices where it increases
and decreases the tax
burden on oil and gas
companies as oil and gas
prices fluctuate.
What is the impact?
It is difficult to model the economic benefit
that will be enjoyed by shareholders when
there is not stability in the fiscal environments
and it is difficult to put in place mitigating
measures. The incumbent government will
often respond to the mood of the electorate,
which can result in policy changes and the
general licensing environment.
What does this mean for Europa?
The value of the production, development
and discovery of hydrocarbons is uncertain
as the stability of the prevailing policies of
the relevant governing bodies cannot be
reliably forecast.
History demonstrates
that the price of crude oil
is never immutable. Its
price experiences wide
price swings in times of
shortage or oversupply.
The price of crude oil may
fluctuate violently affected
by external factors, such
as global macroeconomic
conditions, OPEC policy,
political, war, market
speculation, the value
of the US dollar.
Recently crude oil prices have been
subject to high levels of uncertainty due
to geopolitical factors, uncertain OPEC+
production, and concerns that a global
recession could reduce crude oil demand.
EIA forecasts oil prices to generally remain
near current levels in 2023 with Brent
averaging $95/bbl. Potential petroleum
supply disruptions and slower-than-expected
crude oil production growth could lead to
higher oil prices, while the possibility of
slower-than-forecast economic growth may
contribute to lower prices.
What is the impact?
Fluctuating oil prices has a direct impact
on the Company’s income and results in
uncertainty around the availability of capital
to deploy into development, appraisal and
exploration operations.
What does this mean for Europa?
Europa models its future cash flows and
adopts a conservative view on oil prices
to ensure that the Company does not over
commit the available capital. Where there
are capital commitments which are reliant on
future cash flows that require certainty over
funding then a hedging strategy may
be implemented.
18
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022
Strategic Report
Governance
Financial Statements
Highlights
$95/bbl
EIA oil price forecast, average for 2023
101.8m
Global oil demand prediction for 2023
(from 99.7m b/d in 2022)
The Company operates in
well-regulated jurisdictions
To achieve net zero by 2050,
scope 1 and scope 2 emissions
need to be minimised. This
can be done by producing
hydrocarbons in the most
emissions-efficient manner
possible and also producing
hydrocarbons locally
Demand and supply
Transition to
EIA forecasts that global
consumption of liquid
fuels will rise by an
average of 1.5 million
b/d in 2023. The IEA also
predicts an increase in
demand and in August
2022 forecasts that global
oil demand will increase
from 99.7 million b/d in
2022 to 101.8 million b/d
in 2023.
World oil supply hit a post-pandemic high of
100.5 million b/d in July 2022 as maintenance
wound down in the North Sea, Canada and
Kazakhstan. OPEC+ ramped up total oil
production by 530 kb/d in line with higher
targets and non-OPEC+ rose by 870 kb/d.
World oil supply is set to rise by a further
1 mb/d by year-end 2022.
What is the impact?
The market is currently reasonably balanced.
However, the global macropolitical and
economic environment can change rapidly
and can disrupt this balance.
What does this mean for Europa?
Changes in the global demand / supply
balance will have a direct impact on global
oil prices, which in turn impact the future
income of Europa and, in the case of an over
supplied market, its ability to progress asset
development due to potential shortfalls in
available capital.
renewable energy
With its European
partners the UK has
committed to transition
to net zero carbon
emissions by 2050.
While the transition to net zero carbon
emissions by 2050 is a big challenge,
it is believed to be economically and
technically feasible, and is becoming easier
as the cost of low-carbon technologies
declines. However, during this transition
and beyond there is an ongoing demand
for hydrocarbons, not only as a fuel source
but also due to the myriad of consumer
products that are made from petroleum
products. To achieve these net zero goals
scope 1 and scope 2 emissions need to be
minimised. This can be done by producing
hydrocarbons in the most emissions-efficient
manner possible and also producing
hydrocarbons locally to the demand centres,
rather than transporting the product over
long distances.
What is the impact?
Mature hydrocarbon basins, such as
the North Sea, provide not only a well
understood sub-surface environment but also
existing infrastructure that can be efficiently
utilised to extract hydrocarbons in a well-
regulated environment with world class
levels of emissions. This domestic production
is materially more emissions-efficient than
importing hydrocarbons from overseas.
What does this mean for Europa?
Europa is focused on appraising and
developing hydrocarbons close to centres
of demand and as such contributing towards
the global goals of net zero 2050. The
Company is highly experienced in the
regions where it operates and therefore
understands the specific technical challenges
associated with developing the resource
locally and as such can do so efficiently.
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022
19
Risks and uncertainties
Responsible risk management
The various activities of Europa subject the Company
to a range of financial risks including commodity
prices, liquidity, exchange rates and loss of
operational equipment or wells. These risks are
managed with the oversight of the Board and the Audit
Committee through ongoing review, considering the
operational, business and economic circumstances
at that time. The primary risk facing the business is
that of asset performance.
Key risk
Funding
Description and impact
Mitigation
Significant expenditure is required to establish
the extent of oil and gas reserves through seismic
surveys and drilling and there can be no certainty
that oil and gas reserves will be found.
Licences may be revoked by the relevant issuing
authority if commitments under those licences
are not met. Further details of current licence
commitments are given in notes 11 and 25, also
note comments on going concern in note 1. There
is no mitigation in place at the moment and the
Company assumes $1.15/GBP for forecasting.
Detailed cash forecasts are prepared regularly and
reviewed by management and the Board.
The Group’s production provides a monthly inflow
of cash and is the main source of working capital
and project finance. Additional cash is available
through the placing of Europa shares in the market
and potentially by the trading of assets.
Commodity price and
foreign exchange
Each month’s oil production is sold at a small
discount to Brent price in US Dollars. These funds
are matched where possible against expenditures
within the business. As most capital and operating
expenditures are Sterling denominated, US Dollars
are periodically sold to purchase Sterling. A fall in
oil price could make some projects economically
unviable.
The Board has considered the use of financial
instruments to hedge oil price and US Dollar
exchange rate movements. To date, the Board
has not hedged against price or exchange rate
movements but intends to regularly review this
policy.
Customer
All oil production is sold to one UK-based refinery
– if it was to stop buying Europa’s crude, additional
transportation costs would be incurred.
Other refineries are known to Europa, however
new marketing agreements would need to be
negotiated.
20
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Key risk
Description and impact
Mitigation
Exploration, drilling
and operational
The business of exploration and production
of oil and gas involves a high degree of risk.
Few prospects that are explored are ultimately
developed into producing oil and gas fields.
Current production comes from six oil wells
located at four different sites. This diversity of
producing assets gives Europa resilience in the
event of a problem with one well or site.
Appropriate insurance is obtained annually
which covers some of Europa’s exploration,
development and production activities.
The non-operating partners within each joint
venture assess the technical merits of each joint
venture operator, providing a peer review of
operational activities.
There are numerous risks inherent in drilling and
operating wells, many of which are beyond the
Company’s control. Operations may be curtailed,
delayed or cancelled as a result of environmental
hazards, industrial accidents, occupational and
health hazards, technical failures, weather, reservoir
pressures, shortage or delays in the delivery of
rigs and other equipment, labour disputes and
compliance with governmental requirements.
Drilling may involve unprofitable efforts, not only
with respect to dry wells, but also to wells which,
though yielding some oil or gas, are not sufficiently
productive to justify commercial development.
Completion of a well does not assure a profit on
the investment or recovery of drilling, completion
and operating costs.
Planning risk
Securing planning consent for onshore wells takes
time and the outcome of planning applications is
not certain.
The Group engages planning and legal
specialists in the field.
On behalf of the Board
Will Holland
Chief Financial Officer
11 November 2022
21
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report Section 172
Directors’ statement under Section
172 (1) of the Companies Act 2006
Section 172 (1) of
the Companies Act
obliges the Directors
to promote the success
of the Company for the
benefit of the Company’s
members as a whole.
This section specifies that the Directors must
act in good faith when promoting the success
of the Company and in doing so, have regard
(amongst other things) to:
a)
b)
c)
d)
e)
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 relationship 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
f)
the need to act fairly as between
members of the Company.
• The achievement of oil production at the
Wressle field in North Lincolnshire at a
gross rate of 750 bopd during H1 of 2022
(Europa’s net share: 225 bopd) following
extensive work completed during the year
to 31 July 2022 has served to more than
double the Company’s UK onshore net
production and deliver a huge boost to our
revenue profile, benefitting shareholders
and employees alike.
• The work with Causeway Geothermal (NI)
Ltd continues to assess the potential of our
West Firsby oil field in the East Midlands
as a test site for a sustainable, clean
geothermal energy system as Europa
continues to develop our ESG credentials
so that we may fully participate in the
national energy transition to deliver long-
term benefits not only to the Company and
its shareholders but also the UK’s national
energy grid and the local community.
• The equity raising of £7.02 million gross via
a placement and broker option in March
2022 was necessary in order to fund work
programmes for the future development of
the Company including the evaluation of
recovery improvement initiatives onshore
UK and the pursuit of late-stage appraisal/
development projects to continue
to rebalance the existing portfolio of
production and exploration assets.
• In early September 2022, Europa secured
a loan facility of £1,000,000 from Union
Jack Oil & Gas in order to facilitate any
additional liquidity requirement during the
drilling of the Serenity SA02 well, where
success would have triggered a side-track
or two. The loan was repaid in October
2022.
• A relaunch of the farm-out of the high
potential Inezgane Offshore Permit located
offshore Morocco during the year was
conducted to end the first phase of the
licence.
• The Directors continued farm-out efforts
on the Frontier Exploration Licence (“FEL”)
4/19 located offshore Ireland near the
producing Corrib gas field. This would
allow the Company to maximise the
revenue potential of the licences.
The Board of Directors is collectively
responsible for the Company’s strategy,
which is to develop significant value-
accretive opportunities across a balanced
portfolio of energy assets while minimising
risk to shareholders.
The Board of Directors confirms that during
the last year under review it acted in
accordance with Section 172 (1) of the 2006
Companies Act, which requires the Board
to promote the long-term success of the
Company for the benefit of shareholders.
The strategies developed and executed by
the Company have resulted in achieving
value creation and de-risking of its
development plans, adopting the step-by-
step approach under the leadership and
guidance of the Board of Directors.
Some of the key decisions taken by the
Directors during the year under review
and the significant outcomes achieved by
the Company aimed at delivering on its
strategies included:
• The appointment of William Holland
as Chief Financial Officer (“CFO”) on
a permanent basis in June 2022. This
was following his successful placing
during March as a consultant. Mr Holland
brings a wealth of small energy company
experience to the role and the decision
to appoint him to the role ensures the
strong financial capability of the senior
management team and ensures minimal
disruption to both the Company and its
employees. The Board concluded that Mr
Holland was the best candidate for the
job and will help deliver on the long-term
goals of the Company. The Board also
invited Mr Holland to join the Board and
the shareholders will be invited to approve
the appointment at the next AGM.
• During the year Europa announced the
Serenity farm-in agreement with i3E in
respect of UK Seaward Production Licence
P.2358, Block 13/23c which contains the
Serenity oil discovery. The farm-in is for
25% and is in line with Europa’s stated
strategy to acquire an appraisal project,
adding to its existing assets, and so
creating a more balanced portfolio. The
Serenity appraisal well was drilled at a
cost to Europa of £4.8 million. Each party
will now fund its interests proportionally.
Serenity is strategically located near
existing infrastructure in the North Sea,
however the appraisal well did not confirm
sufficient recoverable volumes for a
standalone development at Serenity
and further appraisal is necessary.
22
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Engaging with our stakeholders
Our engagement channels
Shareholders
Government regulators
Joint Venture partners
How the Group engages
with stakeholder
• Websites – all announcements
• Email notices
• Company’s Twitter and LinkedIn
accounts
• Online meetings
• Physical meetings
How the Group engages
with stakeholder
• NSTA/OGA – Letter, online portal,
seminars and meetings
• PPRS – Monthly submissions and
website data input
• Environment Agency bi-annual
reports, soliciting a CAR and site visits
• HSE site visits, meetings, inspections
• ONHYM letter and email
correspondence
• DECC (formerly PAD) letter and email
correspondence
How the Group engages
with stakeholder
• Email
• Letter Correspondence
• Annual TCM/OCM formal meetings
Suppliers and advisers
Local community
How the Group engages
with stakeholder
• Email
• Orders and payments
• Letters
• KYC work
How the Group engages
with stakeholder
• This is site specific but includes
personal and group meetings
Glossary
CAR
DECC
HSE
KYC
OCM
OGA
NSTA
Compliance Assessment Report
Department of the Environment
and Climate Change (Ireland)
Health and Safety Executive
Know Your Customer
Operations Committee Meeting
Oil & Gas Authority (UK)
North Sea Transition Authority
(UK)
ONHYM Office National des
Hydrocarbures et des Mines
(Morocco)
TCM
Technical Committee Meeting
23
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022Financial StatementsGovernanceStrategic Report
Governance
Chairman’s introduction
to governance
“As Chairman of
Europa Oil & Gas
(Holdings) plc, it is
my responsibility
to ensure that
the Board is
performing its role
effectively and
has the capacity,
ability, structure
and support
to enable it to
continue to do so.
How we govern the Group
The information on corporate governance set
out below and on the website
www.europaoil.com is, in the opinion of the
Board, fully in accordance with the revised
requirements of AIM Rule 26.
The Board has determined that the Quoted
Companies Alliance (“QCA”) Corporate
Governance Code for small and mid-size
quoted companies is the most appropriate
for the Group to adhere to.
The QCA Code is constructed around 10
broad principles and a set of disclosures.
The QCA has stated what it considers to
be appropriate arrangements for growing
companies and asks companies to provide
an explanation of how they are meeting
the principles through the prescribed
disclosures. We have considered how we
apply each principle to the extent that the
Board judges these to be appropriate in the
circumstances, and below we provide an
explanation of the approach taken in relation
to each. The Board considers that it does not
depart from any of the principles of the QCA
Code during the period under review.
The last 12 months have seen, amongst
others, the following governance
developments:
• SG Oddie and BJ O’Cathain met with major
shareholders
• W Holland joined the Board of Directors as
an executive Director
• A Board evaluation review in September
2021, the main action points arising being:
– To strengthen the management team
– To obtain more from meetings of the
Board
– To improve Board diversity
In May 2022 the government published a
white paper entitled “Restoring Trust in Audit
and Corporate Governance”. It was primarily
focused on major companies and the audit
process. The Company report should be
audited and include governance as well as
the conventional financial statements.
This white paper was published to restore
public trust, improve governance, empower
stakeholders and to keep UK regulations at
the forefront of best practice. It was partly
in response to three independent reports
commissioned by government back in 2018,
the Financial Reporting Council by Sir John
Kingman, Audit quality and Effectiveness
by Sir Donald Brydon and the responses
from industry following a survey sent by
the Department for Business, Energy
and Industry.
The Board is aware that the two main themes
from the white paper were; that there was a
need for corporate governance reform but
that there was no real agreement on what
the reforms should be, mainly due to the
large number of suggestions from industry.
However, for the purposes of clarity, the
description of how the Company complies
with the 10 principles of the QCA Code
begins with a summary of those areas where
the Group does not fully comply, followed by
a review of each of the principles in turn.
24
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Summary of QCA principles not fully complied with
Principle 6:
Action
Ensure that between them the Directors have
the necessary up-to-date experience, skills
and capabilities
The Board should understand and challenge
its own diversity, including gender balance,
as part of its composition
Review of each of the QCA principles
Principle 1:
Establish a strategy and business model which
promote long-term value for shareholders
Principle 2:
Seek to understand and meet shareholder
needs and expectations
Principle 3:
Take into account wider stakeholder and social
responsibilities and their implications for long-
term success
The Board found and appointed a Chief Financial Officer (CFO) and Deputy CEO having
given due consideration to all candidates. Naturally the candidate was appointed on merit.
Our strategy is described here: http://www.europaoil.com/strategy.aspx
Also note:
• In early July 2022 following a review of the committee’s work, the Board resolved
to have the Strategy Committee continue to provide support to the executive in
implementing strategy
• The Strategy Committee met once in 2021-22
• Strategy is actively assessed and adjusted by discussion between the Directors
• Strategy is by necessity opportunity driven
The Company engages with shareholders by:
• Conducting regular interviews with Proactive Investors and appearing on virtual forums
• Issuing Regulatory News Service (RNS) announcements
• Maintaining an active Twitter account
• Replying directly to investor questions sent to mail@europaoil.com
• Conducting at least twice-yearly meetings with major shareholders on its results
roadshows to obtain a balanced understanding of their issues and concerns
Shareholder liaison is the responsibility of the CEO and Chairman, with assistance from
the SID.
At the last AGM, voting did not indicate any specific shareholder concerns.
Key stakeholders are:
• Regulators (NSTA/OGA, DECC (Department of Environment, Climate and
Communications (Ireland)), ONHYM (Office National des Hydrocarbures et des Mines),
EA, HSE, Local Authorities
• Host governments
• Local communities
• Partners and Co-venturers
• Employees and consultants
• Phillips 66 (who purchase our produced crude oil)
The CEO provides a weekly report to the Board which includes a section on Stakeholder
and Social Responsibility. This includes stakeholder feedback from multiple sources.
Europa is a member of the Irish Offshore Operators’ Association (“IOOA”) which has been
highly active in promoting the need for oil and gas exploration in Ireland and in particular
the role of indigenous gas.
25
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Governance
Chairman’s introduction
to governance (continued)
Principle 4:
Embed effective risk management, considering
both opportunities and threats, throughout the
organisation
The finance department prepares a risk register for the Group that identifies key
operational and financial risks. All members of the Board are provided with a copy of the
register. The register is updated as and when necessary.
The Audit Committee monitors the integrity of the financial statements and related
announcements, reviews the Company’s internal control processes and risk management
systems, and reports its conclusions to the Board. The committee regularly reviews the
effectiveness of the Company’s systems and risk management.
Within the scope of the annual audit, specific financial risks including foreign currency,
interest rates, liquidity and credit are evaluated in detail.
All members of staff and contractors are provided with a handbook which includes sections
on share dealing, bribery, social media use and whistleblowing. The handbook is updated
and reissued regularly.
We do not currently have a risk management framework, a risk management improvement
programme, a risk training programme, workshops, risk appetite or monitoring dashboard
but will review if any of these would be beneficial in the coming year.
Principle 5:
Maintain the Board as a well-functioning,
balanced team led by the Chair
All of the three NEDs are considered by the Board to be independent.
Biographies are available at: http://www.europaoil.com/Directors.aspx
Two of the Board’s Non-Executive Directors, SA Williams and BJ O’Cathain, hold share
options. Whilst recognising that the granting of options to Non-Executive Directors can
be deemed to compromise independence in accordance with the principles of the QCA
Corporate Governance Code, the Board views this to be part of a balanced remuneration
package to attract and retain high quality candidates and considers the numbers of options
to have no effect upon the independence of these Directors as the sums are insignificant in
the context of the individual’s financial circumstances.
One of the Board’s Non-Executive Directors, CW Ahlefeldt-Laurvig, has been a member
for more than the nine years recommended by the QCA Corporate Governance Code
and holds 3.72% of the Company’s issued share capital. The Board believes him to
be independent in character and free from any other relationship that could affect his
independent judgement. This is demonstrated by his objective and active contribution in
Board meetings and his voting record.
The appointment of SA Williams in March 2020 compensated somewhat for his seniority
and reduced the average tenure of the Board. Directors serving more than six years will
continue to be proposed for re-election at each AGM.
SG Oddie (CEO) is a full-time employee, as is WP Holland.
BJ O’Cathain (Non-Executive Chairman), SA Williams and CW Ahlefeldt-Laurvig (all Non-
Executive Directors) are all expected to devote such time as is necessary for the proper
performance of their duties including attendance at Board meetings, the AGM, and Board
committee meetings.
The minimum numbers of meetings for committees are: are: Audit Committee – two;
ESG – one; Remuneration– one; and Nominations Committee – one. Meetings held and
attendance records of all Directors for the period 1 August 2021 to 31 July 2022 are set
out below.
The Board is balanced in terms of experience, and the split between Executive and
Non-Executive Directors.
All Board and Board committee members received an agenda and associated papers a
few days in advance of meetings.
26
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Principle 6:
Ensure that between them the Directors have
the necessary up-to-date experience,
skills and capabilities
Members of the Board of Directors are listed at: http://www.europaoil.com/Directors.aspx
including their relevant experience, skills and personal qualities. There is an appropriate
breadth of experience covering the key aspects of the business including technical,
operational, financial and international. The gender balance also needs to be addressed
and will be considered at the same time. It is the responsibility of each Director to keep
skills up to date with the assistance of the Chairman who has a core responsibility in
addressing the development needs of the Board as a whole with a view to enhancing
its overall effectiveness.
Board committees call on external advisers where this is deemed necessary.
No significant matters of a corporate governance nature arose during the period covered
by the 2022 Annual Report nor subsequently to the date of this statement on which it was
considered necessary for the Board or any of its committees to seek specific external
advice, although the Board consults with its Nominated Adviser and other professional
advisers on routine matters arising in the ordinary course of its business.
The main internal advisory functions are those of Senior Independent Director and
Company Secretary.
New Directors receive training from the Company’s Nominated Adviser and broker.
Principle 7:
Evaluate Board performance based on clear
and relevant objectives, seeking continuous
improvement
The third effectiveness review used the online Thinking Board Evaluator from Independent
Audit was undertaken during the year. Each Director fed back to the Chairman and results
were assimilated and considered at the following Board meeting. The main areas requiring
attention were:
Principle 8:
Promote a corporate culture that is based on
ethical values and behaviours
• Strengthening the management team. Since the retirement of the Finance Director/
Company Secretary in November 2020 these functions have been provided by internal
non-Board appointees
• Obtaining more from meetings of the Board. The restricted nature of virtual meetings
during the pandemic has limited the scope and benefit. The return to physical
meetings (the first held 7 September 2021), resumption of site visits, physical technical
presentations and informal exchanges of ideas around meetings are expected to
improve this situation significantly
• Board diversity. This will be addressed as the management team is strengthened
The Board has concluded that the fourth review should include an external third-party
component.
Members of the Board are committed to observing and promoting the highest standards
of ethical conduct in the performance of their responsibilities on the Board of Europa. The
Board believes that a culture that is based on the highest ethical standards provides a
competitive advantage and is consistent with fulfilment of the Group’s strategy.
Board meetings have been held virtually on Virtual Media with the resumption of physical
meetings on 7 September 2021. The previous practice of holding a meeting once a year
at one of the production sites has been resumed. Directors are encouraged to spend time
with, listen to, and act upon any concerns of, staff members and contractors.
• The Board considers that cultural differences between UK and Ireland are not material
• We do not have a culture policy, nor a specific culture related employee training/
induction programme but resolve to review the need for such a programme annually
• Culture and strategy are deeply aligned
• The Board ensures that the Company has the means to determine that ethical values
and behaviours are recognised and respected
27
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Governance
Chairman’s introduction
to governance (continued)
Principle 9:
Maintain governance structures and processes
that are fit for purpose and support good
decision making by the Board
Role of the Chairman – BJ O’Cathain
• Runs the Board and sets its agenda
• Promotes the highest standards of corporate governance
• Ensures that the members of the Board receive accurate, timely and clear information,
to promote the success of the Group
• Ensures effective communication with shareholders
• Takes the lead in identifying and meeting the development needs of individual Directors,
ensuring that the performance of individuals and of the Board as a whole and its
committees is evaluated at least once a year
Role of the CEO – SG Oddie
• Develops Group objectives and strategy
• Executes strategy following approval by, the Board
• Identifies and executes licence acquisitions and disposals, joint venture opportunities,
approves major work programmes
• Leads geographic diversification initiatives
• Identifies and executes new business opportunities outside the current core activities
• Manages the Group’s risk profile, including the health and safety performance of
the business, in line with the extent and categories of risk identified as considered
acceptable by the Board
Role of the SID – SA Williams
• Works closely with the Chairman, acting as a sounding board and providing support
• Acts as an intermediary for other Directors as and when necessary
• Is available to shareholders and other Non-Executives to address any concerns or
issues they feel have not been adequately dealt with through the usual channels of
communication
• Meets at least annually with the Non-Executives to review the Chairman’s performance
and carrying out succession planning for the Chairman’s role
• Attends sufficient meetings with major shareholders to obtain a balanced understanding
of their issues and concerns
Role of the Company Secretary – Murray Johnson
• Distributes documents to the Board
• Is available to the ESG, Audit, Remuneration, Nominations and Strategy Committees
as required
• Keeps minutes of meetings
• Updates Companies House records for the Company and subsidiaries
Committee Terms of Reference and Matters Reserved for the Board are available at:
http://www.europaoil.com/corporatedocuments.aspx
The Board intends to continuously review its governance framework in line with the
Company’s plans for growth.
28
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Principle 10:
Communicate how the Company is governed
and is performing by maintaining a dialogue
with shareholders and other relevant
stakeholders
Owing to Covid-19 it is now common practice for SG Oddie and BJ O’Cathain to meet
major shareholders physically as well as virtually.
The Audit Committee met to review the interim and preliminary accounts for the Group
and held meetings with the external auditor without executives present.
The Remuneration Committee met once during the year to review remuneration
and incentives.
During the year the Company has focused on advancing its portfolio and looked at new
asset opportunities.
Past Notice of AGMs are available at: www.europaoil.com/reportsandpresentations.aspx
Board
The Board is responsible for the overall governance of the Company. Its responsibilities include setting the strategic direction of the Company,
providing leadership to put the strategy into action and to supervise the management of the business.
The Board now comprises three Non-Executive Directors (“NEDs”), the CEO and the CFO. Biographies of the Directors are on pages 34 and 35.
All NEDs are considered by the Board to be independent. The roles and responsibilities of the Chairman, CEO, Senior Independent Director
(“SID”) and Company Secretary are set out on the website and summarised below.
BJ O’Cathain is Non-Executive Chairman, SA Williams is the SID, CW Ahlefeldt-Laurvig is a NED.
Terms of Reference
The Terms of Reference of all Board committees are available on the website.
Record of meetings
Meetings held and attendance records of all Directors for the period 1 August 2021 to 31 July 2022 are set out below:
Board
Attended/
Possible
6/6
6/6
6/6
6/6
1/1
ESG
Committee
Attended/
Possible
1/1
1/1
1/1
1/1
0/0
Audit
Committee
Remuneration
Committee
Nominations
Committee
Attended/
Possible
2/2
2/2
2/2
2/2
0/0
Attended/
Possible
1/1
1/1
1/1
1/1
0/0
Attended/
Possible
1/1
1/1
1/1
1/1
0/0
Strategy
Committee
Attended/
Possible
1/1
1/1
1/1
1/1
1/1
SG Oddie
CW Ahlefeldt-Laurvig
BJ O’Cathain
SA Williams
W Holland
Brian O’Cathain
Chairman
29
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Governance
Audit Committee Report
The Audit Committee
meets twice a year and is
chaired by SA Williams.
C W Ahlefeldt-Laurvig
and B J O’Cathain are
members. During the
year, the Committee has
reviewed:
• Internal financial controls systems and
other internal control and risk management
systems;
• The statements to be included in the
annual report concerning internal control,
risk management and the going concern
statement;
• The carrying values of the producing and
intangible assets;
• The adequacy and security of the
Company’s arrangements for its
employees and contractors to raise
concerns about possible wrongdoing in
financial reporting or other matters;
• The procedures for detecting fraud;
• The systems and controls for the
prevention of bribery;
• The need for an internal audit function
The Committee has overseen the relationship
with the external auditor, including:
The Committee reviewed the findings of the
audit with the external auditor, including:
• Approved their remuneration for audit and
non-audit services;
• Approved their terms of engagement and
the scope of the audit;
• Satisfied itself that there are no
relationships between the auditor and the
Company which could adversely affect the
auditor’s independence and objectivity;
• A discussion of issues which arose during
the audit, including any errors identified
during the audit; and the auditor’s
explanation of how the risks to audit
quality were addressed;
• Key accounting and audit judgements;
• The auditor’s view of their interactions with
senior management;
• Monitored the auditor’s processes for
• A review of any representation letters
requested by the external auditor before
they were signed by management;
• A review of the management letter and
management’s response to the auditor’s
findings and recommendations;
• A review of the effectiveness of the audit
process, including an assessment of
the quality of the audit, the handling of
key judgements by the auditor, and the
auditor’s response to questions from the
Committee
Stephen Williams
Audit Committee Chair
maintaining independence, its compliance
with relevant UK law, regulation, other
professional requirements and the Ethical
Standard, including the guidance on the
rotation of audit partner and staff;
• Assessed the qualifications, expertise
and resources, and independence of the
external auditor and the effectiveness of
the external audit process;
• Evaluated the risks to the quality and
effectiveness of the financial reporting
process in the light of the external auditor’s
communications with the Committee;
• Met with the external auditor without
management being present, to discuss the
auditor’s remit and any issues arising from
the audit;
• Discussed with the external auditor the
factors that could affect audit quality and
reviewed and approved the annual audit
plan, ensuring it is consistent with the
scope of the audit engagement, having
regard to the seniority, expertise and
experience of the audit team
30
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Remuneration Committee Report
The Remuneration
Committee reviews
the scale and structure
of the Executive Directors’
remuneration and
the terms of their
service contracts.
The remuneration and
terms and conditions
of appointment of the
Non-Executive Directors
are set by the Board.
BJ O’Cathain chairs the Committee.
CW Ahlefeldt-Laurvig and SA Williams are
members. The Remuneration Committee
met once in the year.
In setting the remuneration for the Executive
Directors and key staff, the Committee
compares published remuneration data for
other AIM and Main LSE Board oil and gas
companies of a similar market capitalisation
and seeks to ensure that the remuneration
of the Executive Directors is broadly
comparable to their peers in other similarly
sized organisations.
In 2021-22:
• There were no changes to remuneration
policy, pension rights and any
compensation payments.
• Changes were made in pay across the
Company and Group.
• An award under the executive bonus
scheme was made for the calendar
year 2021. A scheme for the calendar
year 2022 is in operation for the year
commencing 1st January 2022.
Brian O’Cathain
Remuneration Committee Chair
31
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Governance
Nominations Committee Report
The Nominations
Committee reviews
the size, structure and
composition of the Board
and considers succession
planning. The committee
identifies and nominates
candidates to fill Board
vacancies for approval of
the Board.
Brian O’Cathain chairs the committee.
CW Ahlefeldt-Laurvig and SA Williams are
members. The Nominations Committee
met once in the year and discussed and
recommended:
• The appointment of Will Holland as CFO
and Executive Director
• It was re-iterated that the Company would
look for a female Board member at the
next opportunity
• The Committee reviewed succession
planning and agreed who would step into
senior roles in the event of an emergency
• The time commitment required of the
NEDs was considered to be appropriate
Brian O’Cathain
Nominations Committee Chair
Strategy Committee Report
The Strategy Committee
reviews the strategy to be
adopted by the company,
to review Company
performance, strategic
objectives to consider
single asset opportunities
and to review initiatives,
alliances and potential
mergers.
SG Oddie chairs the Committee.
CW Ahlefeldt-Laurvig, SA Williams, BJ
O’Cathain and W Holland are members. The
Strategy Committee last sat in July 2022.
• The Committee invited W Holland to join
the Committee
• The Committee reviewed a plan to rate
opportunities consistently and agreed
a gate process system
• The Committee agreed to maintain
a strong focus on the North Sea
Simon Oddie
Strategy Committee Chair
32
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 In 2021-22
• Material ESG Topics were identified
• An ESG Strategy was established
• Committed to building on our reporting
framework to enable transparent reporting
Brian O’Cathain
ESG Committee Chair
ESG Committee Report
Environment - The Board is committed to
ensuring that the environmental impacts of
its activities are taken into account and that
the Company is regarded as a good steward
of hydrocarbon resources. As such the ESG
Committee will consider how it can actively
reduce greenhouse gas emissions and
energy consumption in its activities.
Social - The Committee will consider the
Company’s interactions with employees
and all stakeholders of the Company to
ensure that these relationships are being
appropriately managed and will consider the
role of the Company in society to ensure that
all groups impacted by the activities of the
business are given suitable consideration.
Governance - The ESG Committee is
responsible for ensuring that the appropriate
governance policies are in place. All relevant
policies relating to ESG shall be reviewed by
the Committee and where the Committee is
not satisfied, it shall report its views to the
Board.
The ESG Committee
reviews the ESG policies
and initiatives ensuring
they remain effective and
up-to-date along with
ensuring compliance
with legal and regulatory
requirements, including
corporate governance
principles and industry
standards applicable
to the Company. The
Board has adopted a
precautionary approach
to ESG, identifying and
assessing the potential
risks and impacts of our
operations on the world
around us at all stages
of a project and the
oversight of this lies with
the ESG Committee.
33
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Board of Directors
Our strong leadership
Members of the Board of Directors are listed below,
including their relevant experience, skills and
personal qualities.
There is an appropriate breadth of
experience for current activities covering
the key aspects of the business including
technical, operational, financial and
international. The gender balance will be
considered for the next appointment. It is
the responsibility of each Director to keep
skills up to date with the assistance of the
Chairman who has a core responsibility in
addressing the development needs of the
Board as a whole with a view to enhancing
its overall effectiveness.
Board Committees call on external advisers
where this is deemed necessary. During
2020-21 this has not been required.
The main internal advisory functions are that
of Senior Independent Director (SA Williams)
and Company Secretary (Murray Johnson).
E
S
E
A S
SG Oddie
WP Holland
Chief Executive Officer
Chief Financial Officer
Committee membership key
Appointed
January 2018
Appointed
June 2022
Skills and experience
Will is a proven financier with a career
spanning over 25 years in the upstream
industry. He started as an engineer with
Halliburton and focussed on North Sea
operations. He then moved into upstream
banking at Macquarie Bank. Since 2013 he
has run a successful consulting business
which advises energy companies on
commercial, financial and M&A matters.
He has significant experience in corporate
acquisitions, establishing and growing
small cap E&P companies, debt and equity
financing, balance sheet restructuring and
investor relations, much of which was gained
working on deals across the UK and Europe.
He has an engineering degree from
Warwick University and an MBA from
Heriot Watt University.
Skills and experience
Simon joined the Board as non-executive
Chairman in January 2018, was appointed
Interim CEO in November 2019 and then
permanent CEO on 4 August 2020 whilst
stepping down as non-executive Chairman.
He has over 40 years of relevant experience
as a petroleum engineer, technical
consultant, manager and investment adviser
in upstream oil and gas. He has previously
worked with Schlumberger, ERC Energy
Resource Consultants, Enterprise Oil and
Gemini Oil and Gas Advisors LLP.
He was CEO of Enterprise Italy during its
first operated exploration drilling both on
and offshore. Simon more recently was the
architect of the Gemini Oil and Gas royalty
funds where he established a solid track
record in fundraising, investor relations, and
origination, evaluation and execution of oil
and gas deals.
He has completed the Advanced
Management Program (AMP 155) at Harvard
Business School, holds an MSc. in Petroleum
Engineering from Imperial College and a BSc
(First Class) in Electronics from Manchester
University. Simon keeps his skills up to date
through participation in key professional
societies, industry groups, and seminars.
E
A
R
N
S
ESG Committee
Audit Committee
Remuneration Committee
Nominations Committee
Strategy Committee
Chair of Committee
Member of Committee
34
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 E
A R N S
E
A R N S
E
A R N S
BJ O’Cathain
CW Ahlefeldt-Laurvig
SA Williams
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Appointed
January 2018
Appointed
October 2004
Appointed
March 2020
Skills and experience
William helped take Europa onto AIM and
remains one of its largest shareholder. He
started his career at Maersk as a petroleum
engineer in 1982, followed, in 1987, by IPEC,
a London based consultancy, where he was
responsible for field reserves estimations.
In 1990, he became an independent
consultant, undertaking field and portfolio
evaluations for acquisitions and field
development work on a range of projects
in the North Sea, former Soviet Union and
Middle East. He was also, in 1991, a founder
and Non-Executive Director of IFX Infoforex
Ltd which was successfully sold in 2000.
William has continued to work as an
independent consultant petroleum engineer,
latest in 2013 – 2016 for a client in Norway.
Skills and experience
Since October 2017, Stephen has held the
position of Co-CEO of Reabold Resources,
an AIM-traded, upstream oil & gas company
focused on investing in late-stage upstream
opportunities. At Reabold, Stephen has
played a leading role in raising capital,
building a diversified portfolio of investments
in the UK, Romania and the US and, since
August 2018, the company’s participation in
nine wells, eight of which have resulted in
discoveries. Prior to Reabold, Stephen held
various positions within both the energy and
financial sectors including as a fund manager
at Guinness Asset Management and,
between 2010 and 2016, as an investment
analyst at M&G focused on energy and
resources. Between 2005 and 2010, Stephen
worked as an energy investment analyst for
Simmons & Company International and from
2003 to 2005 as an analyst at ExxonMobil.
Skills and experience
Brian has worked as a geologist and
petroleum engineer in the oil and gas sector
since 1984. He began his career with Shell
International and worked at Enterprise Oil
and Tullow Oil in senior roles. He served
as CEO of Afren plc to 2007, and as CEO
of Petroceltic International plc, until 2016.
He was a Non-Executive Director of Eland
Oil and Gas, an AIM-quoted company
producing over 20,000 bopd in Nigeria, until
its successful sale to Seplat plc in December
2019. He is also a Non-Executive Director
of Nephin Energy, a private gas producing
company which is the largest equity holder
in the Corrib Gas Field in Ireland. Nephin
Energy is a 100% subsidiary of Canadian
Pension Plan Investment Board, one of the
world’s largest Pension Funds with assets of
US $396 billion under management (as of
year end 31 March 2022). He is a founding
director and chair of Causeway Geothermal
Limited, a geothermal company.
His skills include market understanding,
fund-raising, and the technical, legal and
financial aspects of running a publicly listed
Oil and Gas company. He led and negotiated
the agreed nil-premium merger of Petroceltic
and Melrose Resources in 2012.
He holds a BSc (First Class) in Geology
from the University of Bristol. Brian keeps
his knowledge and awareness current by
participation in industry conferences, IOD
workshops, and by networking with other
directors and executives in the Oil and
Gas industry.
35
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Governance
Directors’ report
Business review
A detailed review of the Group’s business is set out in the Chairman’s statement (pages 8 and 9) and our operational review (pages 16 and 17).
Future developments
Details of expected future developments for the Group are set out in the Chairman’s statement (pages 8 and 9) and our operational review
(pages 16 and 17).
Dividends
The Directors do not recommend the payment of a dividend (2021: £nil).
Directors and their interests
The Directors’ interests in the share capital of the Company at 31 July were:
CW Ahlefeldt-Laurvig1
BJ O’Cathain
SG Oddie
SA Williams
WP Holland
Number of ordinary shares
Number of ordinary share options
2022
2021
2022
2021
35,739,621
1,467,948
3,384,615
141,131
228,757
34,906,288
634,615
884,615
141,131
–
–
2,950,000
9,200,000
2,500,000
3,721,000
–
2,950,000
9,200,000
2,500,000
–
1. CW Ahlefeldt-Laurvig holds his shares with HSBC Global Custody Nominee (UK) Limited.
Details of the vesting conditions of the Directors’ stock options are included in note 23.
Directors’ interests in transactions
No Director had, during the year or at the end of the year, other than disclosed above, a material interest in any contract in relation to the
Group’s activities except in respect of service agreements.
Subject to the conditions set out in the Companies Act 2006, the Company has arranged appropriate Directors’ and Officers’ insurance
to indemnify the Directors against liability in respect of proceedings brought by third parties. Such provisions remain in force at the date
of this report.
Financial instruments
See note 1 and note 24 to the financial statements.
Related party transactions
See note 27 to the financial statements.
Post reporting date events
See note 28 to the financial statements.
Capital structure and going concern
Further details on the Group’s capital structure are included in note 22. Comments on going concern are included in note 1.
Accounting policies
A full list of accounting policies is set out in note 1 to the financial statements. No new accounting standards were adopted in the period.
Disclosure of information to the auditor
In the case of each person who was a Director at the time this report was approved:
• So far as that Director was aware there was no relevant available information of which the Company’s auditor was unaware; and
• That Director had taken all necessary steps to make themselves aware of any relevant audit information, and to establish that the Company’s
auditor was aware of that information.
Auditor
A resolution to re-appoint the auditor, BDO LLP, will be proposed at the next Annual General Meeting.
On behalf of the Board
Will Holland
Chief Financial Officer
36
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Statement of Directors’ responsibilities
Directors’ responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to
prepare the Group and Company financial statements in accordance with UK adopted International Accounting Standards. 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 year. The Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.
In preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and accounting estimates that are reasonable and prudent;
• State whether they have been prepared in accordance with with UK adopted International Accounting Standards, subject to any material
departures disclosed and explained in the financial statements; and
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements
comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements
are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination
of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
37
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Financial statements
Independent auditor’s report
to the members of the Europa Oil & Gas (Holdings) plc
Opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 July 2022 and of the Group’s profit for the
year then ended;
• have been properly prepared in accordance with UK adopted international accounting standards;
• the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards
and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Europa Oil & Gas (Holdings) Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 July 2022 which comprise the consolidated statement of comprehensive income, consolidated and Company statements of financial
position, consolidated and the Company statements of changes in equity, consolidated and Company statements of cash flows and notes to
the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted International Accounting
Standards and as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue
to adopt the going concern basis of accounting included:
• Reviewing the Directors cash flow forecasts for the period to 31 December 2023 and evaluating the level of cash headroom available and
the assumptions including oil production, oil prices, operating expenditure and capital expenditure. In doing so we compared production
forecasts to recent actual performance trends and considered the oil price assumptions against consensus market prices. We compared the
reasonableness of forecast costs with historical expenditure;
• We have obtained the latest bank statements to compare the opening cash position to the forecasts;
• We have reviewed the cash flow forecasts for mathematical accuracy and formulaic integrity;
• Considering whether previous forecasts were consistent with actuals, to ascertain whether the Directors had a history of accurate forecasting
which is not subject to bias;
• Reviewing board minutes and RNS announcements for any indicators regarding operating costs and production that may have an impact on
the Group’s ability to continue as a going concern;
• Reviewing Director’s sensitivity analysis performed in respect of key assumptions underpinning the forecasts including reviewing the oil price
sensitivity by comparing the sensitivity to market data, production levels from the Wressle well to recent performance trends and limiting
capital expenditure to committed levels;
• Reviewing licences for commitments to check these have been reflected in the cash flow forecasts; and
• Reviewing the adequacy and consistency of the disclosure included within the financial statements in respect of going concern against the
requirement of the accounting standards, the results of our audit testing and the detail of the directors’ going concern assessment.
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 Group and the Parent 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.
38
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Overview
Coverage1
Key audit matters
100% (2021: 97%) of Group profit before tax
100% (2021: 100%) of Group revenue
100% (2021: 99%) of Group total assets
Carrying value of producing assets
Carrying value of exploration and
evaluation assets
Recoverability of the net investment
in subsidiaries
Going concern
2022
X
X
X
N/a
2021
X
X
N/a
X
Going concern has not been assessed as a key audit matter because the group has
generated cash from operating activities due to favourable oil price movements and
increased production levels from the Wressle well.
Materiality
Group financial statements as a whole
£256,000 (2021: £120,000) based on 1.5% (2021: 1.5%) of total assets.
1 These are areas which have been subject to a full scope audit by the group engagement team
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control,
and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
Our Group audit scope focused on the Group’s principal three operating subsidiaries, Europa Oil & Gas Limited, Europa Oil and Gas New
Ventures Limited and Europa Oil & Gas (Inishkea) Limited, all being located in the UK, which were all subject to full scope audits. Together with
the Parent Company which was also subject to a full scope audit, these represent the significant components of the Group. All of the significant
components were audited by the Group audit team.
The remaining four components of the Group were considered non-significant based on their relative size and risk. The financial information of
these components were principally subject to analytical review procedures performed by Group audit team to confirm there were no significant
risks of material misstatements within these components.
39
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Financial statements
Independent auditor’s report
(continued)
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Carrying value of
producing assets
See notes 1 and 12
Judgement is required by management in determining
whether there is an impairment to be recognised or
whether there has been an increase in value that should
give rise to any impairment reversals.
The key estimates and judgements include oil price,
reserves and discount rate.
Based on the assumptions made by management, an
impairment of £570,000 was recognised in 2022.
We considered the carrying value of the producing
assets to be a key audit matter due to the level
of estimation and judgement required and the
complexities of the disclosures in this area.
How the scope of our audit addressed the
key audit matter
For each of the four producing fields we challenged the
appropriateness of the key estimates and assumptions
used by management in the discounted cash flow models
which included a comparison of oil price forecasts to
market outlook reports, recalculation of discount rates,
performing sensitivity analysis in respect of significant
inputs and comparing the reasonableness of cost and
production assumptions to historical data in the year.
We compared the reserves used in the models to the
most recent independent competent persons reports and
assessed the objectivity, competence and independence
of those experts as well as the suitability of the work of
those experts for our purposes. We reviewed the licences
to check whether or not they remain valid.
We compared the production volume data incorporated
into the forecasts to the independent competent persons
reports and made enquiries of any variances with the
internal reservoir engineer and agreed explanations to
supporting documentation.
We recalculated management’s sensitivity assessments
and performed our own sensitivity calculations in respect
of oil prices, production volumes and discount rate.
We considered the appropriateness of the related
disclosures given in notes 1 and 12 in line with the
requirements of the applicable accounting standards.
Key observations:
We consider the judgements made by management in
respect of the carrying value of the producing assets to
be reasonable. The disclosures in the notes, including the
critical judgments are in line with accounting standards.
Carrying value of
exploration and
evaluation assets
See notes 1 and 11
The non-producing exploration assets of the Group are
classified as intangible assets within non-current assets
in the statement of financial position. There are inherent
uncertainties around the recoverability of exploration
and evaluation assets. Based on the assumptions set
out, no impairment was recognised in 2022.
The impairment reviews require judgment and
estimation in determining whether indicators of
impairment exist in accordance with the requirements
of IFRS 6 Exploration for and evaluation of mineral
resources (“IFRS 6”). Management is required to prepare
appropriate disclosure in accordance with applicable
accounting standards.
We obtained management’s impairment assessment and
confirmed there is an ongoing plan to continue to explore
and evaluate the licence areas by making enquiries of
management and corroborating to the group’s forecasts.
We verified that the licences remain valid.
Our specific audit testing in this regard included:
• The verification of licence status, in order to confirm
legal title.
• Reviewing exploration activity to assess whether there
was any evidence from exploration results to date
which would indicate a potential impairment.
40
Key audit
matter
How the scope of our audit addressed the
key audit matter
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Key audit matter
The Moroccan licence is due to expire in November
2022 and the renewal is dependent on finding a farm-in
partner and making a successful application for renewal.
As a result of these factors this represented a key focus
area for our audit and a key audit matter.
Recoverability of the
net investment in
subsidiaries (Parent
Company).
See notes 15 and 24
The Parent Company’s net investment in subsidiaries is
£15,613,000. The carrying value of the net investment in
subsidiaries is ultimately dependent on the value of the
underlying assets.
Management are required to exercise their judgment in
assessing the recoverability of expected credit losses
(ECL) required on inter company receivables, including
considerations of the future profitability and associated
cash flows.
As a result of these factors this represented a key focus
area for our audit and a key audit matter.
How the scope of our audit addressed the
key audit matter
• Obtaining approved budgets, assessing the
consistency of budget with going concern cash flow
forecast and minutes of Board meetings to confirm
whether or not the Group intended to continue to
explore specific licences either through a potential
transaction such as a farm out, or through exploration
undertaken by the Group.
• Making enquiries of managements’ plan to find a farm-in
partner and submit a renewal of the Moroccan licence
and corroborating to supporting documentation.
• Testing the additions to intangible assets for eligibility
against the criteria for capitalisation in IFRS 6, including
reviewing the Serenity farm-in agreement.
We assessed the appropriateness of the disclosures
included in the financial statements given in notes 1 and 11,
in line with the requirements of the applicable accounting
standards.
Key observations:
We consider the judgements and estimates made
by management in determining the carrying value of
exploration and evaluation assets are reasonable.
We draw attention to the disclosure in note 1 to the
financial statements which explains that the recoverability
of the projects in Morocco is dependent on the successful
completion of a transaction with a farm-in partner and
renewal of the licence. The financial statements do not
include any adjustments that would result if the group was
unable to complete such an arrangement and not fully
recover the carrying value of the intangible asset.
Where the Company’s credit loss models for intercompany
loans are linked to the underlying subsidiaries economic
models, we assessed these in line with our work over the
carrying value of producing assets (see key audit matter
above).
We reviewed management’s approach for consistency
compared to previous periods and requested
explanations for changes which we corroborated to
supporting documentation.
We reviewed the adequacy and completeness of the
accounting policies and disclosures for compliance with
IFRS 9.
Key observations:
We consider the judgements made by management in
respect of the Recoverability of Intercompany receivables
to be reasonable.
41
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Financial statements
Independent auditor’s report
(continued)
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that
are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence,
when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Materiality
Group financial statements
Parent company financial statements
2022
256,000
2021
120,000
2022
150,000
2021
40,000
Basis for determining materiality
1.5% of total assets (rounded).
Rationale for the benchmark applied
We consider total assets to be the financial
metric of the most interest to shareholders and
other users of the financial statements, given
the Group’s principal activity in oil and gas
exploration. We therefore consider this to be an
appropriate basis for materiality.
60% of group materiality (rounded) (2021:
33% of group materiality)
Percentage of group materiality based
on the proportionate share of gross
assets
Performance materiality
192,000
90,000
112,500
30,000
Basis for determining performance materiality
75% of Group Materiality considering the nature
of activities and the low level of expected
misstatements.
75% of Parent company Materiality
considering the nature of activities and
the low level of expected misstatements.
Component materiality
We set materiality for each component of the Group based on a percentage of between 9% and 95% of Group materiality dependent on the
size and our assessment of the risk of material misstatement of that component. Component materiality ranged from £24,000 to £243,000
(2021: ranging from £17,000 to £114,000). In the audit of each component, we further applied performance materiality levels of 75% of the
component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £5,120 (2021: £2,400). We also
agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report and
Financial Statements other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
42
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act
2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
and
• the Strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company
and its environment obtained in the course of the audit, we have not identified material
misstatements in the strategic report or the Directors’ report.
Matters on which we are required to
report by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records
and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent 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 Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
Holding discussions with management and the audit committee to understand the laws and regulations relevant to the Group and the Parent
company. These included the significant laws and regulations relating to the oil and gas industry in the UK, Ireland and Morocco, the financial
reporting framework, QCA Code, tax legislation and environmental regulations. Our procedures included the following:
• We understood how the Group is complying with these laws and regulations by holding discussions with management, the audit committee,
and those responsible for legal and compliance procedures to determine any known or suspected instances of non-compliance with laws
and regulations or fraud identified by them. We corroborated our enquiries through our review of board minutes and other supporting
documentation;
• Reviewing the licences to assess the extent to which the Group was in compliance with the conditions of the licence and considering
management’s assessment of the impact of instances of non-compliance where applicable.
43
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Financial statements
Independent auditor’s report
(continued)
We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered the fraud risk areas to be
manipulation of the financial result through journal entries and the assumptions and estimates used in the impairment assessment for producing
assets. Our procedures included the following:
• Testing the appropriateness of journal entries made through the year by applying specific criteria to detect possible irregularities and fraud;
• Performing a detailed review of the Group’s year-end adjusting entries and investigating any that appear unusual as to nature or amount and
agreeing to supporting documentation;
• For significant and unusual transactions, particularly those occurring at or near year-end, obtaining evidence for the rationale of these
transactions;
• Assessing the judgements made by management when making key accounting estimates and judgements, and challenging management on
the appropriateness of these judgements (refer to key audit matters above); and
• We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remaining alert to
any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed
and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the
less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have
formed.
John Black
Senior Statutory Auditor
For and on behalf of BDO LLP, Statutory Auditor
London,
United Kingdom
11 November 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
44
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Consolidated statement of comprehensive income
For the year ended 31 July
Revenue
Cost of sales
Impairment of producing fields
Total cost of sales
Gross profit
Exploration write-off
Administrative expenses
Finance income
Finance expense
Profit/(loss) before taxation
Taxation (expense)/credit
Profit/(loss) for the year
Other comprehensive loss
Items which will not be reclassified to profit/(loss)
Loss on investment revaluation
Total other comprehensive loss
Total comprehensive income/(loss) for the year attributable to the equity shareholders of the parent
Earnings per share (EPS) attributable to the equity shareholders of the parent
Basic EPS
Diluted EPS
The accompanying notes form part of these financial statements.
Note
2
2
12
11
6
7
3
8
9
Note
10
2022
£000
6,584
(3,806)
(570)
(4,376)
2,208
–
(821)
239
(238)
1,388
(32)
1,356
(18)
(18)
1,338
2021
£000
1,372
(1,249)
–
(1,249)
123
(12)
(717)
3
(242)
(845)
127
(718)
(2)
(2)
(720)
Pence
per share
Pence
per share
0.19p
0.18p
(0.15)p
(0.15)p
45
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Consolidated statement of financial position
As at 31 July
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Investments
Inventories
Trade and other receivables
Restricted cash
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Loans
Trade and other payables
Total current liabilities
Non-current liabilities
Loans
Trade and other payables
Long-term provisions
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves attributable to equity holders of the parent
Share capital
Share premium
Merger reserve
Retained deficit
Total equity
Note
2022
£000
2021
£000
11
12
13
14
15
16
18
17
18
17
21
22
22
22
3,785
3,021
6,806
24
36
1,866
6,884
1,394
10,204
17,010
(40)
(1,573)
(1,613)
–
(4)
(4,164)
(4,168)
(5,781)
11,229
9,565
23,660
2,868
(24,864)
11,229
6,438
369
6,807
42
23
522
230
641
1,458
8,265
(10)
(1,556)
(1,566)
(40)
(17)
(3,393)
(3,450)
(5,016)
3,249
5,665
21,157
2,868
(26,441)
3,249
These financial statements were approved by the Board of Directors and authorised for issue on 11 November 2022 and signed on its
behalf by:
Will Holland
Chief Financial Officer
Company registration number 05217946
The accompanying notes form part of these financial statements.
46
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Consolidated statement of changes in equity
Balance at 1 August 2020
Comprehensive loss for the year
Loss for the year attributable to the
equity shareholders of the parent
Other comprehensive loss attributable to the
equity shareholders of the parent
Total comprehensive loss for the year
Contributions by and distributions to owners
Issue of share capital
Issue of share warrants(note 23)
Share-based payments (note 23)
Total contributions by and distributions to owners
Balance at 31 July 2021
Balance at 1 August 2021
Comprehensive profit for the year
Profit for the year attributable to the
equity shareholders of the parent
Other comprehensive loss attributable to the
equity shareholders of the parent
Total comprehensive profit for the year
Contributions by and distributions to owners
Issue of share capital
Issue of share warrants(note 23)
Share-based payments (note 23)
Total contributions by and distributions to owners
Balance at 31 July 2022
The accompanying notes form part of these financial statements.
Share capital
£000
Share premium
£000
Merger reserve
£000
Retained deficit
£000
Total equity
£000
Attributable to the equity holders of the parent
4,447
21,010
2,868
(25,838)
2,487
–
–
–
1,218
–
–
1,218
5,665
–
–
–
225
(78)
–
147
–
–
–
–
–
–
–
(718)
(2)
(720)
–
78
39
117
21,157
2,868
(26,441)
(718)
(2)
(720)
1,443
–
39
1,482
3,249
5,665
21,157
2,868
(26,441)
3,249
1,356
1,356
–
–
–
3,900
–
–
3,900
9,565
–
–
–
2,722
(219)
–
2,503
23,660
–
–
–
–
–
–
–
(18)
1,338
–
219
20
239
2,868
(24,864)
(18)
1,338
6,622
–
20
6,642
11,229
47
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Company statement of financial position
As at 31 July
Assets
Non-current assets
Property, plant and equipment
Investments
Amounts due from Group companies
Total non-current assets
Current assets
Other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Loans
Trade and other payables
Total current liabilities
Loans
Trade and other payables
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves attributable to equity holders of the parent
Share capital
Share premium
Merger reserve
Retained deficit
Total equity
Note
12
13
15, 24
15
18
17
18
17
22
22
22
2022
£000
2021
£000
26
2,343
13,270
15,639
163
249
412
23
2,343
588
2,954
69
272
341
16,051
3,295
(40)
(546)
(586)
–
(3)
(3)
(589)
15,462
9,565
23,660
2,868
(20,631)
15,462
(10)
(652)
(662)
(40)
(11)
(51)
(713)
2,582
5,665
21,157
2,868
(27,108)
2,582
The Company has taken advantage of the exemption provided under Section 408 of the Companies Act 2006 not to publish its individual
statement of comprehensive income and related notes. The profit dealt with in the financial statements of the parent Company is £6,238,000
(2021: loss of £1,485,000).
These financial statements were approved by the Board of Directors and authorised for issue on 11 November 2022, and signed on its
behalf by:
Will Holland
Chief Financial Officer
Company registration number 05217946
The accompanying notes form part of these financial statements.
48
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022
Company statement of changes in equity
Balance at 1 August 2020 originally stated
Comprehensive loss for the year
Loss for the year attributable to the
equity shareholders of the parent
Total comprehensive loss for the year
Contributions by and distributions to owners
Issue of share capital
Issue of share warrants (note 23)
Share-based payments (note 23)
Total contributions by and distributions to owners
Balance at 31 July 2021
Balance at 1 August 2021 originally stated
Comprehensive profit for the year
Profit for the year attributable to the
equity shareholders of the parent
Total comprehensive profit for the year
Contributions by and distributions to owners
Issue of share capital
Issue of share warrants (note 23)
Share-based payments (note 23)
Total contributions by and distributions to owners
Balance at 31 July 2022
The accompanying notes form part of these financial statements.
Share capital
£000
Share premium
£000
Merger reserve
£000
Retained deficit
£000
Total equity
£000
4,447
21,010
2,868
(25,740)
2,585
–
–
1,218
–
–
1,218
5,665
–
–
225
(78)
–
147
–
–
–
–
–
–
(1,485)
(1,485)
(1,485)
(1,485)
–
78
39
117
1,443
–
39
1,482
2,582
21,157
2,868
(27,108)
5,665
21,157
2,868
(27,108)
2,582
–
–
3,900
–
–
3,900
9,565
–
–
2,722
(219)
–
2,503
23,660
–
–
–
–
–
–
6,238
6,238
–
219
20
239
6,238
6,238
6,622
–
20
6,642
2,868
(20,631)
15,462
49
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Consolidated statement of cash flows
For the year ended 31 July
Cash flows from/(used in) operating activities
Profit/(loss) after tax from continuing operations
Adjustments for:
Share-based payments
Depreciation
Impairment of producing field
Exploration write off
Finance income
Finance expense
Taxation credit recognised in profit and loss
Increase in trade and other receivables
Increase in inventories
Increase in trade and other payables
Net cash generated by/(used) in operations
Income taxes repayment received
Net cash generated by/(used) in operating activities
Cash flows used in investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Cash guarantee re Morocco
Cash escrow deposit re Serenity
Interest received
Net cash used in investing activities
Cash flows from financing activities
Gross proceeds from issue of share capital
Costs incurred on issue of share capital
Proceeds from borrowings
Repayment of borrowings
Lease liability payments
Lease liability interest payments
Finance costs
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Exchange gain/(loss) on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The accompanying notes form part of these financial statements.
50
Note
23
12
12
11
6
7
8
16
16
22
2022
£000
1,356
20
1,618
570
–
–
238
32
(1,344)
(13)
18
2,495
(32)
2,463
(403)
(1,246)
–
(6,621)
–
(8,270)
7,020
(398)
–
(10)
(14)
(2)
(3)
6,593
786
(33)
641
1,394
2021
£000
(718)
39
107
–
12
(3)
242
(127)
(288)
(11)
85
(662)
127
(535)
–
(985)
(4)
–
3
(986)
1,583
(140)
225
(225)
(35)
(2)
(7)
1,399
(122)
(5)
768
641
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Company statement of cash flows
For the year ended 31 July
Cash flows from/(used in) operating activities
Profit/(loss) after tax from continuing operations
Adjustments for:
Share-based payments
Depreciation
Movement in intercompany loan provision
Finance income
Finance expense
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash used in operating activities
Cash flows used in investing activities
Purchase of property, plant and equipment
Movement on loans to Group companies
Net cash used in investing activities
Cash flows from/(used in) financing activities
Gross proceeds from issue of share capital
Costs incurred on issue of share capital
Proceeds from borrowings
Repayment of borrowings
Lease liability principal payment
Lease liability interest payment
Finance costs
Net cash from financing activities
Net decrease in cash and cash equivalents
Exchange gain on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The accompanying notes form part of these financial statements.
Note
23
12
24
22
2022
£000
2021
£000
6,238
(1,485)
20
10
(5,720)
(810)
2
(93)
(106)
(459)
(13)
(6,152)
(6,165)
7,020
(398)
–
(10)
(8)
(1)
(2)
6,601
(23)
–
272
249
39
32
1,921
(654)
5
(16)
36
(122)
–
(1,306)
(1,306)
1,583
(140)
225
(225)
(26)
(1)
(4)
1,412
(16)
–
288
272
51
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements
1. Accounting policies
General information
Europa Oil & Gas (Holdings) plc is a Company incorporated and domiciled in England and Wales with registered number 05217946.
The address of the registered office is 30 Newman Street, London, W1T 1PT.
The functional and presentational currency of the Company is Sterling (UK£).
Basis of accounting
The consolidated and individual Company financial statements have been prepared in accordance with applicable with UK adopted
International Accounting Standards.
The accounting policies that have been applied in the opening statement of financial position have also been applied throughout all periods
presented in these financial statements. These accounting policies comply with each IFRS that is mandatory for accounting periods ending
on 31 July 2022.
Going concern
The Directors have prepared a cash flow forecast for the period ending 31 December 2023, which considers the continuing and forecast
cash inflow from the Group’s producing assets, the cash held by the Group at October 2022, less administrative expenses and planned capital
expenditure.
The Directors performed sensitivities on the cash flow allowing for a 30% fall in the expected oil price from a base case price of $85 per barrel
five-year average and, separately, a 15% fall in the expected overall production across all fields from a base case of 225 barrels per day during
the 2023 fiscal year net to Europa. Oil price estimates are based upon industry analyst expectations, whilst production estimates are sourced
from the Group’s internal modelling for Wressle and recent actual production.
These sensitivities have been modelled as a reverse stress test, and the Directors consider the likelihood of such movements to be very low.
The Directors have also run sensitivities allowing for reasonably possible simultaneous falls in oil price and in Wressle production, and the
Group and Company had sufficient cash resources to meet their obligations.
The Directors have concluded, as at the date of approval of these financial statements, that there is a reasonable expectation that the Group
and Company will still have sufficient cash resources to be able to continue as a going concern and meet its obligations as and when they fall
due over the going concern period.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of
these elements of control. Intra Group balances are eliminated on consolidation. Unrealised gains on transactions between the Group and
its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
The Group is engaged in oil and gas exploration, development and production through unincorporated joint operations.
Joint arrangements
Joint arrangements are those arrangements in which the Group holds an interest on a long-term basis which are jointly controlled by the
Group and one or more venturers under a contractual arrangement. When these arrangements do not constitute entities in their own right, the
consolidated financial statements reflect the relevant proportion of costs, revenues, assets and liabilities applicable to the Group’s interests in
accordance with IFRS 11. The Group’s exploration, development and production activities are presently conducted jointly with other companies
in this way.
For the licences where the Group does not hold 100% equity a joint arrangement exists. The equity and voting interest of the Group is
disclosed in the table, activities are typical for activities in the oil and gas sector and are strategic to the Group’s activities. The principal place
of business for all the joint arrangements is the UK.
52
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 1. Accounting policies (continued)
Revenue recognition
The Group follows IFRS 15. The standard provides a single comprehensive model for revenue recognition. The core principle of the standard
is that an entity shall recognise revenue when control passes on the transfer of promised goods or services to customers at an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a
new contract-based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. This is
described further in the accounting policies below. Contracts with customers are presented in an entity’s balance sheet as a contract liability,
a contract asset, or a receivable, depending on the relationship between the entity’s performance and the customer’s payment. The Group’s
accounting policy under IFRS 15 is that revenue is recognised when the Group satisfies a performance obligation by transferring oil to a
customer. The title to oil and gas typically transfers to a customer at the same time as the customer takes physical possession of the oil or gas.
Typically, at this point in time, the performance obligations of the Group are fully satisfied.
Revenue is measured based on the consideration to which the Group expects to be entitled under the terms of a contract with a customer.
The consideration is determined by the quantity and price of oil and gas delivered to the customer at the end of each month.
Non-current assets
Oil and gas interests
The financial statements with regard to oil and gas exploration and appraisal expenditure have been prepared under the full cost basis.
This accords with IFRS 6 which permits the continued application of a previously adopted accounting policy. The unit of account for exploration
and evaluation assets is the individual licence.
Pre-production assets
Pre-production assets are categorised as intangible assets on the statement of financial position. Pre-licence expenditure is expensed as
directed by IFRS 6. Expenditure on licence acquisition costs, geological and geophysical costs, costs of drilling exploration, appraisal and
development wells, and an appropriate share of overheads (including Directors’ costs) are capitalised and accumulated on a licence-by-licence
basis. These costs which relate to the exploration, appraisal and development of oil and gas interests are initially held as intangible non-current
assets pending determination of technical feasibility and commercial viability. On commencement of production these costs are tested for
impairment prior to transfer to production assets. If licences are relinquished, or assets are not deemed technically feasible or commercially
viable, accumulated costs are written off to cost of sales.
Production assets
Production assets are categorised within property, plant and equipment on the statement of financial position. With the determination of
commercial viability and approval of an oil and gas project the related pre-production assets are transferred from intangible non-current assets
to tangible non-current assets and depreciated upon commencement of production within the appropriate cash generating unit.
Impairment tests
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash
generating units) as disclosed in notes 11 and 12. As a result, some assets are tested individually for impairment and some are tested at cash
generating unit level.
Impairment tests are performed when indicators as described in IAS 36 are identified. In addition, indicators such as a lack of funding or farmout
options for a licence which is approaching termination or the implied value of a farm-out transaction are considered as indicators of impairment.
An impairment loss is recognised and charged to cost of sales for the amount by which the asset’s or cash generating unit’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value
in use based on an internal discounted cash flow evaluation. All assets are subsequently reassessed for indications that an impairment loss
previously recognised may no longer exist.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs
and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised
within provisions.
Depreciation
All expenditure within tangible non-current assets is depreciated from the commencement of production, on a unit of production basis, which
is the ratio of oil and gas production in the period to the estimated quantities of proven plus probable commercial reserves at the end of the
period, plus the production in the period. Costs used in the unit of production calculation comprise the net book value of capitalised costs.
Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively.
Furniture and computers are depreciated on a 25% per annum straight line basis.
53
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
1. Accounting policies (continued)
Non-current assets (continued)
Reserves
Proven and probable oil and gas reserves are estimated quantities of commercially producible hydrocarbons which the existing geological,
geophysical and engineering data shows to be recoverable in future years. The proven reserves included herein conform to the definition
approved by the Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC). The probable and possible reserves conform
to definitions of probable and possible approved by the SPE/WPC using the deterministic methodology. Reserves used in accounting estimates
for depreciation are updated periodically to reflect management’s view of reserves in conjunction with third party formal reports. Reserves are
reviewed at the time of formal updates or as a consequence of operational performance, plans and the business environment at that time.
Reserves are adjusted in the year that formal updates are undertaken or as a consequence of operational performance and plans, and the
business environment at that time, with any resulting changes not applied retrospectively.
Future decommissioning costs
A provision for decommissioning is recognised in full at the point that the Group has an obligation to decommission an appraisal, development
or producing well. A corresponding non-current asset (included within producing fields in note 12) of an amount equivalent to the provision is
also created. The amount recognised is the estimated cost of decommissioning, discounted to its net present value and is reassessed each
year in accordance with local conditions and requirements. For producing wells, the asset is subsequently depreciated as part of the capital
costs of production facilities within tangible non-current assets, on a unit of production basis. Any decommissioning obligation in respect
of a pre-production asset is carried forward as part of its cost and tested annually for impairment in accordance with the above policy.
Changes in the estimates of commercial reserves or decommissioning cost estimates are dealt with prospectively by recording an adjustment
to the provision, and a corresponding adjustment to the decommissioning asset. The unwinding of the discount on the decommissioning
provision is included within finance expense.
Acquisitions of exploration licences
Acquisitions of exploration licences through acquisition of non-operational corporate structures that do not represent a business, and therefore
do not meet the definition of a business combination, are accounted for as the acquisition of an asset. Related future consideration that is
contingent is not recognised as an asset or liability until the contingent event has occurred.
Taxation
Current tax is the tax payable based on taxable profit/(loss) for the year.
Deferred income taxes are calculated using the balance sheet liability method on temporary differences. Deferred tax is generally provided on
the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial
recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects
tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if
reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.
Tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that
the underlying deductible temporary difference will be able to be offset against future taxable income. Current and deferred tax assets
and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or
substantively enacted at the reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income, except
where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited
directly to equity.
Foreign currency
The Group and Company prepare their financial statements in Sterling.
Transactions denominated in foreign currencies are translated at the rates of exchange ruling at the date of the transaction. Monetary assets
and liabilities in foreign currencies are translated at the rates of exchange ruling at the reporting date. Non-monetary items that are measured at
historical cost in a foreign currency are translated at the exchange rate at the date of transaction. Non-monetary items that are measured at fair
value in a foreign currency are translated using the exchange rates at the date the fair value was determined.
Any exchange differences arising on the settlement of items or on translating items at rates different from those at which they were initially
recorded are recognised in the Statement of comprehensive income in the period in which they arise. Exchange differences on non-monetary
items are recognised in the Statement of changes in equity to the extent that they relate to a gain or loss on that non-monetary item taken to
the Statement of changes in equity, otherwise such gains and losses are recognised in the Statement of comprehensive income.
Europa Oil & Gas (Holdings) plc is domiciled in the UK, which is its primary economic environment, and the Company’s functional currency is
Sterling. The Group’s current operations are based in the UK and Ireland and the functional currencies of the Group’s entities are the prevailing
local currencies in each jurisdiction. Given that the functional currency of the Company is Sterling, management has elected to continue to
present the consolidated financial statements of the Group and Company in Sterling.
54
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 1. Accounting policies (continued)
Investments
Investments, which are only investments in subsidiaries, are carried at cost less any impairment. Additions include the net value of share
options issued to employees of subsidiary companies less any lapsed, unvested options.
Financial instruments
Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets
Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive income (“FVTOCI”) or at
fair value through profit or loss (“FVPL”) depending upon the business model for managing the financial assets and the nature of the contractual
cash flow characteristics of the financial asset.
A loss allowance for expected credit losses is determined for all financial assets, other than those at FVPL, at the end of each reporting
period. The Group applies a simplified approach to measure the credit loss allowance for trade receivables using the lifetime expected credit
loss provision. The lifetime expected credit loss is evaluated for each trade receivable taking into account payment history, payments made
subsequent to year end and prior to reporting, past default experience and the impact of any other relevant and current observable data.
The Group applies a general approach on all other receivables classified as financial assets. The general approach recognises lifetime
expected credit losses when there has been a significant increase in credit risk since initial recognition.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial
asset and substantially all the risks and rewards of ownership of the asset to another party. The Group derecognises financial liabilities when
the Group’s obligations are discharged, cancelled or have expired.
Fair value through other comprehensive income
The Group has a number of strategic investments in listed and unlisted entities which are not accounted for as subsidiaries, associates or
jointly controlled entities. For those investments, the Group has made an irrevocable election to classify the investments at fair value through
other comprehensive income rather than through profit or loss as the Group considers this measurement to be the most representative of
the business model for these assets. They are carried at fair value with changes in fair value recognised in other comprehensive income
and accumulated in the fair value through other comprehensive income reserve. Upon disposal any balance within fair value through other
comprehensive income reserve is reclassified directly to retained earnings and is not reclassified to profit or loss.
Dividends are recognised in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment, in which case
the full or partial amount of the dividend is recorded against the associated investment’s carrying amount.
Purchases and sales of financial assets measured at fair value through other comprehensive income are recognised on settlement date with
any change in fair value between trade date and settlement date being recognised in the fair value through other comprehensive income
reserve.
Amortised cost
This category is the most relevant to the Company. Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. The losses arising from impairment are recognised in a separate line in the income
statement. This category generally applies to trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents are carried at cost and include all highly liquid investments with a maturity of three months or less.
Restricted cash are those amounts held by third parties on behalf of the Group and are not available for the Group’s use; these are accounted
for separately from cash and cash equivalents.
Financial liabilities
The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its
characteristics. All purchases of financial liabilities are recorded on trade date, being the date on which the Group becomes party to the
contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Group’s financial liabilities approximate
to their fair values. The Group’s financial liabilities consist of financial liabilities measured at amortised cost and financial liabilities at fair value
through profit or loss.
Trade and other payables
Trade and other payables are initially recorded at fair value and subsequently carried at amortised cost.
Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled.
Any gain or loss on derecognition is taken to the statement of comprehensive income.
55
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
1. Accounting policies (continued)
Treatment of finance costs
All finance costs are expensed through the income statement. The Group does not incur any finance costs that qualify for capitalisation.
Defined contribution pension schemes
The pension costs charged against profits are the contributions payable to the scheme in respect of the accounting period.
Inventories
Inventories comprise oil in tanks stated at the lower of cost and net realisable value. Cost is determined by reference to the actual cost of
production in the period.
Share-based payments
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are
rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the
instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for
example, profitability and sales growth targets).
All equity-settled share-based payments are ultimately recognised as an expense in the statement of comprehensive income with a
corresponding credit to reserves. Where options over the parent Company’s shares are granted to employees of subsidiaries of the parent, the
charge is recognised in the statement of comprehensive income of the subsidiary. In the parent Company accounts there is an increase in the
cost of the investment in the subsidiary receiving the benefit.
If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share
options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period.
No adjustment is made to any expense recognised in prior periods if the number of share options ultimately exercised is different to that
initially estimated.
Upon exercise of share options, the proceeds received, net of attributable transaction costs, are credited to share capital, and where
appropriate share premium.
Critical accounting judgements and key sources of estimation uncertainty
Details of the Group’s significant accounting judgements and critical accounting estimates are set out in these financial statements and include:
• Carrying value of intangible assets (note 11) – carrying values are justified with reference to indicators of impairment as set out in IFRS 6.
Based on judgements at 31 July 2022 there was £nil write off (2021: £12k write off of costs on the PEDL 299 licence). The licence in Morocco
expires in November 2022 and its renewal is dependent on finding a farm-in partner. These financial statements do not include
the adjustments that would result if the licence was not renewed.
• Carrying value of property, plant and equipment (note 12) – carrying values are justified by reference to future estimates of cash flows,
discounted at appropriate rates. At 31 July 2022 there was £570k write off related to West Firsby and Crosby Warren, which predominantly
related to the impairment of the additional decommissioning assets created by a commensurate increase in the decommissioning liability for
these producing assets.
• Deferred taxation (note 20) – assumptions regarding the future profitability of the Group and whether the deferred tax assets will
be recovered.
• Decommissioning provision (note 21) – inflation and discount rate estimates (3% and 10% respectively) are used in calculating the provision,
along with third party estimates of remediation costs.
• Share based payments (note 23) – measurement of the fair value of options granted uses valuation techniques where active market quotes
are not available. This involves developing estimates and assumptions consistent with how market participants would price the instrument.
Management bases its assumptions on observable data as far as possible but this is not always available. In that case, management uses the
best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the
reporting date.
• Reserves and resources (note 12) – reserves and resources are estimated based on management’s view and third party formal reports and
these estimates directly impact the recoverability of asset carrying values that are reported in the financial statements.
56
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 2. Operating segment analysis
In the opinion of the Directors the Group has four reportable segments as reported to the Chief Executive Officer, being the UK, Ireland,
Morocco and new ventures.
The reporting on these segments to management focuses on revenue, operating costs and capital expenditure. The impact of such criteria
is discussed further in the Chairman’s statement and strategic report of this annual report.
Income statement for the year ended 31 July 2022
Revenue
Cost of sales
Impairment of producing fields
Cost of sales
Gross profit
Exploration write-off
Administrative expenses
Finance income
Finance costs
Profit before tax
Taxation
Profit for the year
Segmental assets and liabilities as at 31 July 2022
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Other segment items
Capital expenditure – cash flow
Depreciation
Share-based payments
UK
£000
6,584
(3,806)
(570)
(4,376)
2,208
–
(1,082)
205
(238)
1,093
(32)
1,061
UK
£000
3,624
9,941
13,565
(4,168)
(1,594)
(5,762)
795
1,618
20
Ireland
£000
Morocco
£’000
New ventures
£000
–
–
–
–
–
–
268
1
–
269
–
269
Ireland
£000
1,796
–
1,796
–
(19)
(19)
129
–
–
–
–
–
–
–
–
–
33
–
33
–
33
–
–
–
–
–
–
(7)
–
–
(7)
–
(7)
Morocco
£000
New ventures
£’000
1,386
263
1,649
–
–
–
725
–
–
–
–
–
–
–
–
–
–
–
Total
£000
6,584
(3,806)
(570)
(4,376)
2,208
–
(821)
239
(238)
1,388
(32)
1,356
Total
£000
6,806
10,204
17,010
(4,168)
(1,613)
(5,781)
1,649
1,618
20
57
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
2. Operating segment analysis (continued)
Income statement for the year ended 31 July 2021
Revenue
Cost of sales
Impairment of producing fields
Cost of sales
Gross profit
Exploration write-off
Administrative expenses
Finance income
Finance costs
Loss before tax
Taxation
Loss for the year
Segmental assets and liabilities as at 31 July 2021
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Other segment items
Capital expenditure
Depreciation
Share-based payments
UK
£000
1,372
(1,249)
–
(1,249)
123
(12)
(545)
3
(242)
(673)
–
(673)
UK
£000
4,489
1,228
5,717
(3,450)
(1,203)
(4,653)
644
107
117
Ireland
£000
Morocco
£’000
New ventures
£000
–
–
–
–
–
–
(109)
–
–
(109)
127
18
Ireland
£000
1,661
–
1,661
–
(363)
(363)
105
–
–
–
–
–
–
–
–
(1)
–
–
(1)
–
(1)
–
–
–
–
–
–
(62)
–
–
(62)
–
(62)
Morocco
£000
New ventures
£’000
657
230
887
–
–
–
236
–
–
–
–
–
–
–
–
–
–
–
Total
£000
1,372
(1,249)
–
(1,249)
123
(12)
(717)
3
(242)
(845)
127
(718)
Total
£000
6,807
1,458
8,265
(3,450)
(1,566)
(5,016)
985
107
117
100% of the total revenue (2021: 100%) relates to UK based customers. Of this figure, one end customer (2021: one) commands more than 99%
of the total, including sales made through operators to the end customer. UK revenue by site was as follows: West Firsby £353,000 (2021:
£321,000); Crosby Warren £651,000 (2021: £390,000); Whisby £696,000 (2021: £487,000); and Wressle £4,884,000 (2021: £174,000).
3. Profit/loss before taxation
Profit/loss before taxation is stated after charging:
Depreciation and amortisation on property, plant and equipment
Staff costs including Directors
Diesel
Business rates
Site safety and security
Exploration write-off
Impairment
Fees payable to the auditor for the audit
Operating leases – land and buildings
Foreign exchange (gain)/loss
58
N ote
12
5
11
12
2022
£000
1,618
806
163
43
89
–
570
70
43
(239)
2021
£000
107
652
104
52
68
12
–
55
42
3
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 4. Directors’ emoluments
Directors’ salaries and fees – Company and Group
CW Ahlefeldt-Laurvig
P Greenhalgh (to 14 October 2020)
BJ O’Cathain
SG Oddie
S Williams
W Holland (appointed 1 June 2022)
Directors’ pensions
P Greenhalgh (to 14 October 2020)
W Holland (appointed 1 June 2022)
The above charge represents premiums paid to money purchase pension plans during the year.
Directors’ share-based payments
SG Oddie
BJ O’Cathain
S Williams
W Holland
2022
£000
26
–
41
258
31
27
383
2022
£000
–
3
3
2022
£000
9
2
2
6
19
2021
£000
18
32
28
146
21
–
245
2021
£000
3
–
3
2021
£000
20
4
4
–
28
The above represents the accounting charge in respect of share options. No share options were exercised during the period (2021: none).
Directors’ total emoluments
Salaries and fees
Social security costs
Pensions
Share-based payments
2022
£000
383
50
3
19
455
2021
£000
245
28
3
28
304
59
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
5. Employee information
Average monthly number of employees including Directors – Group
Management and technical
Field exploration and production
Staff costs – Group
Wages and salaries (including Directors’ emoluments)
Social security
Pensions
Share-based payments (note 23)
Average monthly number of employees including Directors – Company
Management and technical
Staff costs – Company
Wages and salaries (including Directors’ emoluments)
Social security
Pensions
Share-based payments
6. Finance income
Bank interest received
Foreign exchange gains
7. Finance expense
Unwinding of discount on decommissioning provision (note 21)
Other finance expense
60
2022
Number
2021
Number
6
4
10
2022
£000
676
83
27
20
806
7
4
11
2021
£000
528
62
27
35
652
2022
Number
2021
Number
6
6
2022
£000
463
60
12
20
555
2022
£000
–
239
239
2022
£000
233
5
238
7
7
2021
£000
345
39
12
33
429
2021
£000
3
–
3
2021
£000
230
12
242
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 8. Taxation
Movement in deferred tax asset (note 20)
Movement in deferred tax liability (note 20)
Current tax – UK
R&D tax credits – Ireland
Tax (expense) credit
2022
£000
318
(318)
(32)
–
(32)
2021
£000
(176)
176
–
127
127
UK corporation tax is calculated at 40% (2021: 40%) of the estimated assessable profit for the year being the applicable rate for a ring-fence
trade including the Supplementary Charge of 10%. From 24 May 2022 a new UK tax, the Excess Profits Levy (“EPL”) applies to the Group,
and it is levied at 25% of assessable EPL profits. The current tax expense for the year ending 31 July 2022 related exclusively to EPL.
Profit/(loss) before tax
Tax reconciliation
Profit/(loss) multiplied by the standard rate of corporation tax in the UK including Supplementary Charge of
40% (2021: 40%)
Expenses not deductible for tax purposes
Deferred tax asset not recognised
R&D tax credit received re prior years
Previously unrecognised tax losses utilised
Other reconciling items
Total tax expense/(credit)
Future changes to tax rates
2022
£000
1,388
555
430
235
–
(1,187)
(1)
32
2021
£000
(845)
(338)
94
99
127
–
(109)
(127)
The Finance Act 2021 increased the UK corporation tax rate from 19% to 25% effective 1 April 2023 for companies with profits in excess of GBP
250,000. The impact of this rate change on the Group is limited to the increase in the potential value of non-ring-fence UK trading losses which
are currently not recognised (note 20).
9. Other comprehensive income
Loss on investment revaluation
2022
£000
(18)
2021
£000
(2)
On 8 May 2019, the Group sold its interest in PEDL143 to UK Oil & Gas Plc (“UKOG”) for 25,951,557 UKOG shares. At the time of the sale the
shares were worth 1.156p each, resulting in a total value of £300,000. The investment was revalued at the year end to £24,000 (0.09p per
share (2021: £42,000 (0.163p per share)). An irrevocable election has been made to record gains and losses arising on the shares as other
comprehensive income.
10. Earnings per share
Basic earnings per share (“EPS”) has been calculated on the loss after taxation divided by the weighted average number of shares in issue
during the period. Diluted EPS uses an average number of shares adjusted to allow for the issue of shares on the assumed conversion of all
in-the-money options.
As the Group made a loss from continuing operations in the prior year, any potentially dilutive instruments were considered to be anti-dilutive
for that year. Therefore, the diluted EPS is equal to the basic EPS for the prior year. As at 31 July 2022 there were 37,607,821 (2021: 26,029,154)
potentially dilutive instruments in issue.
The calculation of the basic and diluted earnings per share is based on the following:
Profit/(loss) for the year attributable to the equity shareholders of the parent
Weighted average number of shares
For the purposes of basic EPS
For the purpose of diluted EPS
2022
£000
1,356
2021
£000
(718)
700,028,629
737,636,450
494,420,476
494,420,476
61
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
11. Intangible assets
Intangible assets – Group
At 1 August
Additions
Transferred to property, plant and equipment (note 12)
Exploration write-off
At 31 July
Intangible assets comprise the Group’s pre-production expenditure on licence interests as follows:
Ireland FEL 4/19 (Inishkea)
UK PEDL180 (Wressle – transferred to tangible assets)
UK PEDL181
UK PEDL182 (Broughton North)
UK PEDL343 (Cloughton)
Morocco (Inezgane)
Serenity
Total
Exploration write-off
UK PEDL299 (Hardstoft)
Total
2022
£000
6,438
1,246
(3,899)
–
3,785
2022
£000
1,789
–
81
34
92
1,379
410
3,785
2022
£000
–
–
2021
£000
4,965
1,485
–
(12)
6,438
2021
£000
1,662
3,893
113
34
79
657
–
6,438
2021
£000
12
12
In July 2022 the Group completed a farm-in agreement with i3 Energy plc in relation to UK offshore licence P.2358, Block 13/23c (“Serenity”).
Under the farm-in agreement the Group will earn a participating interest of 25% by paying 46.25% of the cost of a single appraisal well (see
note 28).
If the Group elects not to continue in any other licence, then the impact on the financial statements will be the impairment of some or all of the
intangible assets disclosed above. Details of commitments are included in note 25.
62
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 12. Property, plant and equipment
Property, plant and equipment – Group
Cost
At 31 July 2020
Additions
Disposals
At 31 July 2021
Additions
Transferred from intangible assets (note 11)
At 31 July 2022
Depreciation, depletion and impairment
At 31 July 2020
Charge for year
Disposal
At 31 July 2021
Charge for year
Disposal
Impairment in year
At 31 July 2022
Net book value
At 31 July 2020
At 31 July 2021
At 31 July 2022
Furniture &
computers
£000
Producing
fields
£000
Right of
use assets
£000
6
–
(1)
5
13
–
18
3
1
(1)
3
1
–
–
4
3
2
14
10,887
–
–
10,887
928
3,899
15,714
10,488
64
–
10,552
1,601
–
570
12,723
399
335
2,991
147
–
(80)
67
–
–
67
73
42
(80)
35
16
–
–
51
74
32
16
Total
£000
11,040
–
(81)
10,959
941
3,899
15,799
10,564
107
(81)
10,590
1,618
–
570
12,778
476
369
3,021
The producing fields referred to in the table above are the production assets of the Group, namely the oilfields at Wressle, Crosby Warren and
West Firsby, and the Group’s interest in the Whisby W4 well.
The carrying value of each producing field was tested for impairment by comparing the carrying value with the value-in-use. The value-in-use
was calculated using a discounted cash flow model with production decline rates based on engineering estimates and recent production
experience. Brent crude prices were based on the average of forecasts by four international firms of specialist oil and gas reserves auditors
and a Big 4 accounting firm and ranged from:
• 2023: US$94 per barrel
• 2024: US$86 per barrel
• 2025: US$80 per barrel
• 2026 onwards: US$82 to $90 per barrel
The post-tax discount rate of 10% is high because of the applicable rates of tax in the UK. Cash flows were projected over the expected life of
the fields which is expected to be longer than five years.
Based on the assumptions set out above, an impairment of £570,000 was required in relation to the West Firsby and Crosby Warren fields
(2021: no impairment was required). The recoverable amount was calculated at a discount rate of 10% (2021: 10%).
63
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
12. Property, plant and equipment (continued)
Sensitivity to key assumption changes
Variations to the key assumptions used in the value-in-use calculation, as outlined above, would cause impairment of the producing fields
as follows:
Impairment of
producing fields
£000
–
–
–
–
–
–
Total
£000
123
–
(81)
42
13
55
68
32
(81)
19
10
29
55
23
26
Furniture &
computers
£000
Right of
use assets
£000
6
–
(1)
5
13
18
3
1
(1)
3
1
4
3
2
14
117
–
(80)
37
–
37
65
31
(80)
16
9
25
52
21
12
Production decline rate
+10%
-10%
Brent crude price per barrel
$75 flat
$65 flat
Pre-tax discount rate
20%
25%
Property, plant and equipment – Company
Cost
At 31 July 2020
Additions
Disposals
At 31 July 2021
Additions
At 31 July 2022
Depreciation
At 31 July 2020
Charge for year
Disposals
At 31 July 2021
Charge for year
At 31 July 2022
Net book value
At 31 July 2020
At 31 July 2021
At 31 July 2022
64
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 13. Investments – Group
Investment in shares
At 1 August
Current year additions
Write off on revaluation
At 31 July
2022
£000
42
–
(18)
24
2021
£000
44
–
(2)
42
On 8 May 2019, the Group sold its interest in PEDL143 to UK Oil & Gas Plc (“UKOG”) for 25,951,557 UKOG shares. At the time of the sale the
shares were worth 1.156p each, resulting in a total value of £300,000. The investment was revalued at the year end to the value of £24,000
(0.09p per share) (2021: £42,000 (0.163p per share), with the loss being recorded in other comprehensive income (note 9).
Investments – Company
Investment in subsidiaries
At 1 August
Current year additions
At 31 July
2022
£000
2,343
–
2,343
2021
£000
2,341
2
2,343
The Company’s investments at the reporting date include 100% of the share capital in the following unlisted companies:
• Europa Oil & Gas Limited, which undertakes oil and gas exploration, development and production in the UK
• Europa Oil & Gas (West Firsby) Limited, which is non-trading
• Europa Oil & Gas (Ireland West) Limited, which held the interest in the FEL 2/13 licence
• Europa Oil & Gas (Ireland East) Limited, which held the interest in the FEL 3/13 and FEL 1/17 licences
• Europa Oil & Gas (Inishkea) Limited, which holds the interest in the FEL 4/19 and held the interest in FEL 3/19 licences
• Europa Oil & Gas (New Ventures) Limited, which holds the interest in the Moroccan licence
All six companies are registered in England and Wales, all having their registered office at 30 Newman Street, London W1T 1PT
The results of the six companies have been included in the consolidated accounts
Europa Oil & Gas Limited owns 100% of the ordinary share capital of Europa Oil & Gas (UK) Limited (registered in England and Wales
and non-trading)
14. Inventories – Group
Oil in tanks
15. Trade and other receivables
Current trade and other receivables
Trade receivables
Other receivables
Prepayments
Non-current other receivables
Owed by Group undertakings (note 24)
2022
£000
1,476
185
205
1,866
–
Group
2021
£000
330
67
125
522
–
2022
£000
36
2022
£000
–
43
120
163
2021
£000
23
Company
2021
£000
–
11
58
69
13,270
588
65
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
16. Restricted cash
Cash guarantee
Security escrow funds
2022
£000
263
6,621
6,884
Group
2021
£000
230
–
230
2022
£000
–
–
–
Company
2021
£000
–
–
–
Pursuant to the requirements of the farm-in agreement with i3 Energy plc in relation to UK offshore licence P.2358, Block 13/23c (“Serenity”),
the Group deposited into an escrow account the full remaining committed funding requirement for its paying share of the 2022 appraisal well.
i3 Energy plc is able to draw funds actually incurred on the Serenity well from the escrow account and the account cannot be used for any
other purpose. The escrow account is treated as restricted cash.
A requirement of the petroleum agreement with the National Office of Hydrocarbons and Mines (“ONHYM”) was the setting up of a guarantee
for $315,000 (£263,000) (2021: $315,000 (£230,000)). This is treated as restricted cash.
17. Trade and other payables
Current trade and other payables
Trade payables
Lease liabilities
Corporation tax payable
Other payables
Non-current trade and other payables
Lease liabilities
18. Borrowings
Loans repayable in less than 1 year
Bounce Back Loan
Total short-term borrowing
Loans repayable in 1 to 2 years
Bounce Back Loan
Loans repayable in 2 to 5 years
Bounce Back Loan
Loans repayable in over 5 years
Bounce Back Loan
Total long-term borrowing
2022
£000
1,234
13
32
294
1,573
Group
2021
£000
963
31
–
562
1,556
4
17
2022
£000
40
40
–
–
–
–
Group
2021
£000
10
10
10
30
–
40
2022
£000
480
8
–
58
546
3
2022
£000
40
40
–
–
–
–
Company
2021
£000
503
19
–
130
652
11
Company
2021
£000
10
10
10
30
–
40
In June 2020 the Group drew down on a Bounce Back Loan for £50,000 under the Government’s Covid-19 policies. The loan is repayable
within six years of drawdown but with a 12-month holiday and repayments started in July 2021. The annual rate of interest is 2.5%. The loan was
repaid in full in 19 January 2021.
On 19 January 2021 the Group entered into a related party loan agreement with CW Ahlefeldt-Laurvig (a Group Non-Executive Director and
shareholder). Under this agreement, Europa Oil & Gas drew funds of £225,000 on 20 January 2021 for a term of four months (with the option of
early repayment). The loan was unsecured and interest accrued on a daily basis at an effective interest rate of 12.57% per annum. The loan and
accrued interest was fully repaid in March 2021.
66
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 19. Leases
Amounts recognised in the statement of comprehensive income:
Interest on right of use liabilities
Amounts recognised in the statement of cash flows:
Repayment of lease liabilities – principal
Repayment of lease liabilities – interest
Maturity analysis (undiscounted):
Amounts due within 1 year
Amounts due after more than 1 year & less than 5 years
Amounts due after more than 5 years
2022
£000
(2)
(14)
(2)
(14)
(2)
–
Group
2021
£000
(2)
(35)
(2)
(6)
(6)
–
2022
£000
Company
2021
£000
(1)
(8)
(1)
(8)
(2)
–
(1)
(8)
(1)
(9)
(11)
–
The Group’s right of use asset comprises the lease of four vehicles (note 12). The corresponding lease liability for the right to use leased assets
are included within trade and other payables in the statement of financial position (note 17).
20. Deferred tax – Group
Recognised deferred tax asset:
As at 1 August
(Charged)/credited to statement of comprehensive income
At 31 July
2022
£000
–
–
–
2021
£000
–
–
–
The Group has a deferred tax liability of £1,433,000 (2021: £1,290,000) arising from accelerated capital allowances and a deferred tax asset of
£1,433,000 (2021: £1,290,000) arising from trading losses which will be utilised against future taxable profits. These were offset against each
other, resulting in a £nil net asset/liability (2021: £nil net asset/liability). This offsetting was required because the Group settles current tax assets
and liabilities on a net basis.
Non-recognised long-term deferred tax asset
The Group has a non-recognised deferred tax asset of £5,222,000 (2021: £4,259,000), which arises in relation to ring-fence UK trading losses
of £8.9 million (2021: £4.8 million), non-ring-fence UK trading losses of £12.2 million (2021: £11.7 million) and subsidiary losses and carried forward
capital expenditure of £6.7 million (2021: subsidiary losses of £1.8 million) that have not been recognised in the accounts as the timing of the
utilisation of the losses is considered uncertain.
No deferred tax assets or liabilities are recognised in the Company.
21. Provisions – Group
Decommissioning provisions are based on third party estimates of work which will be required and the judgement of Directors. By their nature,
the detailed scope of work required and timing are uncertain.
Long-term provisions
As at 1 August
Charged to statement of comprehensive income (note 7)
Change in estimated phasing of cash flows
At 31 July
2022
£000
3,393
233
538
4,164
2021
£000
3,163
230
–
3,393
The increase in the estimated decommissioning provision resulted mainly from a reassessment of the estimated timings of when such
decommissioning activities are undertaken at the end of their economic lives.
67
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
21. Provisions – Group (continued)
Sensitivity to key assumption changes
Variations to the key assumptions used in the decommissioning provision estimates would cause increases/(reductions) to the provision
as follows:
Inflation rate (current assumption 3%)
2%
5%
Discount rate (current assumption 10%)
5%
15%
No provisions have been recognised in the Company.
22. Called up share capital
Allotted, called up and fully paid ordinary shares of 1p
At 1 August 2021: 566,466,985 shares (1 August 2020: 444,691,599)
Issued in the year: 390,000,000 shares (2021: 121,775,386 shares)
At 31 July: 956,466,985 shares (2021: 566,466,985)
Further
decommissioning
provision
£000
(134)
215
776
(550)
2021
£000
4,447
1,218
5,665
2022
£000
5,665
3,900
9,565
Ordinary shares issued
Date
28 March 2022
Type of Issue
Placing
Total
Number of shares
390,000,000
390,000,000
Issue price
0.018
Raised gross
£000
Raised net of costs
£000
Nominal value
£000
7,020
7,020
6,622
6,622
3,900
3,900
The costs of £398,000 incurred on the issue of share capital include £219,000 of non-cash expenses. All of the allotted shares are ordinary
shares of the same class and rank pari passu. The following describes the purpose of each reserve within owners’ equity:
Reserve
Share premium
Merger reserve
Retained deficit
Description and purpose
Amount subscribed for share capital in excess of nominal value
Reserve created on issue of shares on acquisition of subsidiaries in prior years
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income
68
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 23. Share-based payments
The Group operates an approved Enterprise Management Incentive (“EMI”) share option scheme for employees and an unapproved scheme
for grants in excess of EMI limits and for non-employees. Both schemes are equity-settled share-based payments as defined in IFRS 2 Share-
based payments. A recognised valuation methodology is employed to determine the fair value of options granted as set out in the standard.
The charge incurred relating to these options is recognised within operating costs.
Combined information for the two schemes operated by the Group is set out below.
There are 41,207,821 ordinary 1p share options/warrants outstanding (2021: 26,029,154).
These are held as follows:
Holder
BJ O’Cathain
SG Oddie
SA Williams
W Holland
Employees of the Group
Consultants and advisers
Total
31 July
2022
31 July
2021
2,950,000
9,200,000
2,500,000
3,721,000
2,740,000
20,096,821
2,950,000
9,200,000
2,500,000
–
3,425,000
7,954,154
41,207,821
26,029,154
The fair values of options were determined using a Black Scholes Merton model or, in the case of ones issued to advisers as part of the share
issue, the fair value was deemed to be the share issue price. Volatility is based on the Company’s share price volatility since flotation.
In the year 15,863,667 options/warrants were granted, nil expired, 685,000 were forfeited, and none were exercised (2021: 21,404,154 granted,
2,223,458 expired, 17,355,000 forfeited, none exercised).
Outstanding at the start of the year
Granted – employees/Directors
Granted – consultants
Granted – advisers
Expired
Forfeited
Outstanding at the end of the year
Exercisable at the end of the year
2022
Number
of options
2022
Average
exercise price
2021
Number
of options
2021
Average
exercise price
26,029,154
3,721,000
–
12,142,667
–
(685,000)
41,207,821
18,096,821
2.37p
2.31p
–
1.80p
–
7.00p
2.02p
1.64p
24,203,458
13,450,000
2,000,000
5,954,154
(2,223,458)
(17,355,000)
26,029,154
9,814,154
8.15p
1.23p
1.23p
1.3p
2.8p
12.85p
2.37p
2.84p
The 3,721,000 options granted in June 2022 vest 1,240,333 after each of 12, 24 and 36 months, are exercisable conditional upon the Europa
Oil & Gas (Holdings) plc closing average mid-market share price being above 4.62p for 30 consecutive trading days and expire on the sixth
anniversary of the grant date. The inputs used to determine their values are detailed in the table:
Grant date
Number of options
Share price at grant
Exercise price
Volatility
Dividend yield
Risk free investment rate
Option life in years
Fair value per option
1 June 2022
3,721,000
2.5p
2.31p
62.8%
Nil
1.791%
6
1.50p
The 12,142,667 warrants issued in March 2022 were issued to advisers as part of the share fund raise. The fair value to the options warrants
was estimated to be 1.8p per warrant.
Based on the fair values above, the charge arising from employee share options was £20,000 (2021: £35,000). The charge relating to non-
employee share options was £nil (2021: £4,000). The charge allocated direct to equity, relating to the issue of options on the issue of share
capital, was £219,000 (2021: £78,000).
Share options/warrants outstanding at the end of the period have exercise prices ranging from 1.23p to 10.0p and the weighted average
remaining contractual life at the end of the period was 3.4 years (2021: 3.8 years).
69
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
24. Financial instruments
The Group’s and Company’s financial instruments comprise cash and cash equivalents, bank borrowings, loans, and items such as trade and
other receivables and trade and other payables which arise directly from its operations. Europa’s activities are subject to a range of financial
risks, the main ones being credit; liquidity; interest rates; commodity prices; foreign exchange; and capital. These risks are managed through
ongoing review considering the operational, business and economic circumstances at that time.
Financial assets
Investments
Trade and other receivables
Restricted cash
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade and other payables
Loans
Total financial liabilities
Amortised cost
2022
£’000
Amortised cost
2021
£’000
–
1,661
6,884
1,394
9,939
–
397
230
641
1,268
Amortised cost
2022
£’000
Amortised cost
2021
£’000
(1,577)
(40)
(1,617)
(1,573)
(50)
(1,623)
Fair value
through other
comprehensive
income
2022
£’000
Fair value
through other
comprehensive
income
2021
£’000
24
–
–
–
24
42
–
–
–
42
Fair value
through other
comprehensive
income
2022
£’000
Fair value
through other
comprehensive
income
2021
£’000
–
–
–
–
–
–
Credit risk
The Group is exposed to credit risk as all crude oil production is effectively sold to one multinational oil company. The customer is invoiced
monthly for the oil delivered to the refinery in the previous month and invoices are generally settled in full within the same month that invoices
are issued. At 31 July 2022 trade receivables were £1,476,000 (2021: £330,000). The fair value of trade receivables and payables approximates
to their carrying value because of their short maturity. Any surplus cash is held on short-term deposit with Royal Bank of Scotland. The maximum
credit exposure in the year was £1,433,000 comprising of mainly two months of Wressle sales, due to the invoice for June deliveries only being
received on 1 August 2022 (2021: £175,000). The Company exposure to third party credit risk is negligible. The intercompany balances with its
subsidiaries have been appropriately provided for to account for potential impairments.
Liquidity risk
The Company currently has no overdraft or overdraft facility with its bankers.
The Group and Company monitor their levels of working capital to ensure they can meet liabilities as they fall due. The following table shows
the contractual maturities (representing the undiscounted cash flows) of the Group’s and Company’s financial liabilities.
At 31 July
6 months or less
Total
At 31 July
6 to 12 months
1 to 2 years
2 to 5 years
Over 5 years
Total
Group
Trade and other payables
Company
Trade and other payables
2022
£000
1,573
1,573
2022
£000
40
–
–
–
40
2021
£000
1,556
1,556
Group
loans
2021
£000
5
5
10
30
50
2022
£000
546
546
2022
£000
40
–
–
–
40
2021
£000
652
652
Company
loans
2021
£000
5
5
10
30
50
Cash and cash equivalents in both Group and Company are all available at short notice.
Trade and other payables do not normally incur interest charges. There is no difference between the fair value of the trade and other payables
and their carrying amounts.
70
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 24. Financial instruments (continued)
Interest rate risk
The Group has immaterial interest-bearing liabilities (note 18) and leases (note 19). All loans and leases are at fixed rates of interest and the
Group and Company are not exposed to changes in interest rates.
Commodity price risk
The selling price of the Group’s production of crude oil is set at a small discount to Brent prices. The table below shows the range of prices
achieved in the year and the sensitivity of the Group’s loss before taxation (“LBT”) or profit before tax (“PBT”) to such movements in oil price.
There would be a corresponding increase or decrease to net assets. There is no commodity price risk in the Company.
Oil price
Highest
Average
Lowest
Month
June 2022
August 2021
2022
Price
US$/bbl
$122.40
$93.90
$69.50
2022
PBT
£000
1,723
(208)
(1,864)
2021
Price
US$/bbl
$73.60
$55.80
$39.10
2021
LBT
£000
(420)
(845)
(1,262)
Foreign exchange risk
The Group’s production of crude oil is invoiced in US$. Revenue is translated into Sterling using a monthly exchange rate set by reference to
the market rate. The table below shows the range of average monthly US$ exchange rates used in the year and the sensitivity of the Group’s
PBT/LBT to similar movements in US$ exchange. There would be a corresponding increase or decrease in net assets.
US Dollar
Highest
Average
Lowest
Month
August 2021
July 2022
2022
Rate
US$/£
1.376
1.313
1.216
2022
PBT
£000
(373)
(76)
443
2021
Rate
US$/£
1.418
1.271
1.292
2021
LBT
£000
(902)
(845)
(775)
The table below shows the Group’s currency exposures. Exposures comprise the net financial assets and liabilities of the Group that are not
denominated in the functional currency.
Currency
Euro
US Dollar
Total
Item
Cash and cash equivalents
Trade and other payables
Cash and cash equivalents
Trade and other receivables
Trade and other payables
2022
£000
92
(13)
1,322
1,435
(5)
2,831
Group
2021
£000
2
(458)
339
290
–
173
2022
£000
3
(13)
3
–
(5)
(12)
Company
2021
£000
2
(397)
6
–
–
(389)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns
for shareholders and maintain an optimal capital structure to reduce the cost of capital. The Group defines capital as being the consolidated
shareholder equity (note 22) and third-party borrowings (£40,000 at 31 July 2022). The Board monitors the level of capital as compared to the
Group’s long-term debt commitments and adjusts the ratio of debt to capital as is determined to be necessary, by issuing new shares, reducing
or increasing debt, paying dividends and returning capital to shareholders. The Group has a £40k loan subject to an annual 2.5% interest
charge and contractually repayable over six years with a one-year holiday and no early repayment penalty. Repayments commenced in July
2021 and the loan was fully repaid in August 2022.
Intercompany loans
The loans to the subsidiaries are not classified as repayable on demand. IFRS 9 requires consideration of the expected credit risk associated
with the loan. As the subsidiary company does not have any liquid assets to sell to repay the loan, should it be recalled, the conclusion reached
was that the loan should be categorised as stage 3.
As part of the assessment of expected credit losses of the intercompany loan receivable, the Directors have considered the published chance
of success for Inishkea, and applying the same 33% general wildcat exploration success rate to Inezgane, the loans to Europa Oil & Gas
Inishkea and Europa Oil & Gas New Ventures have thus been 67% provided.
The loan to Europa Oil & Gas (Ireland West) and Europa Oil & Gas (Ireland East) have been provided in full due to the relinquishment of the
licence held by the subsidiaries.
During the year to 31 July 2022 there has been a marked increase in the expected recoverable reserves of the Group’s Wressle producing
asset which led to a partial reversal of previous provisions for impairment that had been made in relation to loans to Europa Oil Gas Ltd.
71
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 Notes to the financial statements (continued)
24. Financial instruments (continued)
Intercompany loans (continued)
The movement in the provision was as follows:
Gross loan balances
Loan balance at 31 July 2020
Movement in loan
Loan balance at 31 July 2021
Movement in loan
Loan balance at 31 July 2022
Provisions
Provision at 31 July 2020
Movement in provision
Provision at 31 July 2021
Movement in provision
Provision at 31 July 2022
Net loan balance at 1 August 2020
Net loan balance at 31 July 2021
Net loan balance at 31 July 2022
Europa
Oil & Gas Limited
£000
Europa
Oil & Gas
(Ireland West)
Limited
£000
Europa
Oil & Gas
(Ireland East)
Limited
£000
Europa
Oil & Gas
(Inishkea)
Limited
£000
Europa
Oil & Gas
(New Ventures)
Limited
£000
18,585
1,593
20,178
6,357
26,535
(18,585)
(1,593)
(20,178)
6,135
(14,043)
–
–
12,492
763
–
763
18
781
(763)
–
(763)
(18)
(781)
–
–
–
1,480
–
1,480
15
1,495
(1,480)
–
(1,480)
(15)
(1,495)
–
–
–
796
228
1,024
144
1,168
(533)
(154)
(687)
(96)
(783)
263
337
385
504
258
762
428
1,190
(337)
(174)
(511)
(286)
(797)
167
251
393
Total
£000
22,128
2,079
24,207
6,962
31,169
(21,698)
(1,921)
(23,619)
5,720
(17,899)
430
588
13,270
25. Capital commitments and guarantees
Following completion of the farm-in to Production Licence P.2358, Block 13/23c (“Serenity”) £6.9 million was transferred into an escrow account
held under an agreement with Law Debentures to cover the commitment to pay 46.25% of the appraisal well costs.
As part of the 18-month licence extension for FEL 4/19 there is an outstanding commitment totalling €0.6 million that relates primarily to
seismic reprocessing.
To satisfy the terms of the Inezgane licence there is an outstanding commitment totalling £0.4 million that relates to the completion of the initial
phase work programme mainly comprising seismic inversion and basin modelling. In addition, there is a commitment to provide a $0.1 million
training contribution to ONHYM.
For PEDL181 there is a contingent commitment to drill two development wells into the Penistone formation, an exploration well for Broughton
North and a gas to power project. These activities are contingent upon the budget being approved by the JV partnership. The total net cost
to Europa for the work programme is estimated to be £1.35 million in 2023 and £3.66 million in 2024.
26. Operating lease commitments
Europa Oil & Gas Limited pays annual site rentals for the land upon which the West Firsby and Crosby Warren oil field facilities are located.
• The West Firsby lease can be terminated on two months’ notice. The annual cost is currently £22,000 (2021: £22,000) increasing annually
in line with the retail price index
• The Crosby Warren lease runs until December 2022 and can be terminated on three months’ notice. The annual cost is currently £20,000
(2021: £20,000)
Future minimum lease payments are as follows:
Less than 1 year
2-5 years
Total
72
2022
£000
9
–
9
2021
£000
9
–
9
Europa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 27. Related party transactions
Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Group. In
the opinion of the Board, the Group’s and the Company’s key management are the Directors of Europa Oil & Gas (Holdings) plc. Information
regarding their compensation is given in note 4.
During the year, the Company provided services to subsidiary companies as follows:
Europa Oil & Gas Limited
Europa Oil & Gas (Inishkea) Limited
Europa Oil & Gas (New Ventures) Limited
Total
At the end of the year, after provisions, the Company was owed the following amounts by subsidiaries:
Europa Oil & Gas Limited
Europa Oil & Gas (Inishkea) Limited
Europa Oil & Gas (New Ventures) Limited
Total
2022
£000
236
42
19
297
2022
£000
12,492
385
393
13,270
2021
£000
1,208
38
25
1,271
2021
£000
–
337
251
588
On 19 January 2021, the Group entered into a related party loan agreement with CW Ahlefeldt-Laurvig (a Group Non-Executive director and
shareholder). Under this agreement, Europa Oil & Gas drew funds of £225,000 on 20 January 2021 for a term of four months (with the option of
early repayment). The loan was unsecured and interest accrued on a daily basis at an effective interest rate of 12.57% per annum. The loan and
accrued interest was fully repaid in March 2021.
28. Post reporting date events
• The Serenity appraisal well did not find oil bearing sands and as such the well was plugged and abandoned for a forecast gross well cost of
£10.4 million resulting in an estimated total cost to Europa of £4.8 million. The remaining £2 million held in the escrow fund will be released to
Europa and will no longer be restricted
• On 2 November 2022 the Company’s application to the Department of the Environment, Climate and Communications (“DECC”) for an
extension to the first phase of its 100%-owned FEL 4/19 licence was granted and as such the licence is now live until 31 January 2024
• On 8 September 2022 the Company entered into a loan agreement with Union Jack Oil plc (“UJO”). The key features of the loan were:
£1 million loan amount, 18-month term, interest rate of 11% per annum, repayable at any point during the term without penalty and secured
against 10% interest in the Wressle field (PEDL180, and PEDL182). The loan was to provide additional liquidity during the drilling of the
Serenity appraisal well. The loan was repaid in full on 18 October 2022
73
Financial StatementsGovernanceStrategic ReportEuropa Oil & Gas (Holdings) plc Annual Report and Financial Statements 2022 For further information, please visit
www.europaoil.com or contact: mail@europaoil.com
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Europa Oil & Gas (Holdings) plc
UK Office
30 Newman Street
London W1T 1PT
T: +44 (0)20 7224 3770
E: mail@europaoil.com
europaoil.com