PetroNeft Resources plc
Annual Report and
Financial Statements
for the year ended 31 December 2023
PetroNeft Resources plc
Contents
Company Information ............................................................................................................................. 2
Board of Directors ................................................................................................................................... 4
Highlights ................................................................................................................................................ 6
Chairman’s Statement ............................................................................................................................ 7
Chief Executive Officer’s Report ............................................................................................................. 9
Financial Review .................................................................................................................................... 10
Company Income Statement ................................................................................................................ 10
Directors’ Report ................................................................................................................................... 15
Company Income Statement ................................................................................................................ 20
Company Statement of Financial Position ............................................................................................ 21
Company Statement of Changes in Equity ........................................................................................... 22
Company Cash Flow Statement ............................................................................................................ 23
Notes to the Financial Statements........................................................................................................ 24
Corporate Governance Code ................................................................................................................ 61
Glossary ................................................................................................................................................. 62
Annual Report and Financial Statements
Forward Looking Statements
This report contains forward-looking statements. These statements relate to the Company's prospects, developments, and business strategies. Forward-
looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the
negative of those, variations, or comparable expressions, including references to assumptions.
The forward-looking statements in this report are based on current expectations and are subject to risks and uncertainties that could cause actual results
to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of these financial
statements.
PetroNeft Resources plc
[2]
Company Information
Directors
David Sturt (British citizen- appointed 21 October 2022)
(Executive Chairman)
Pavel Tetyakov (Russian citizen- appointed 21 October 2022,
previously Executive Director and Senior Vice President Business
Development) (Chief Executive Officer)
Anthony Sacca (Australian citizen – resigned 4 January 2024)
(Independent Non-Executive Director)
Daria Shaftelskaya (Russian citizen – appointed in January 2020)
(Non-Executive Director)
Eskil Jersing (British citizen – resigned 4 January 2024),
(Independent Non - Executive Director)
Michael Power (Irish citizen- appointed 4 January 2024),
(Independent Executive Director)
Registered Office and Business Address
20 Holles Street
Dublin 2
Ireland
Secretary
Michael Power FCA
Auditor
Unable to appoint due to adverse events arising from
international sanctions.
Nomad and Euronext Growth Listing
Davy (Resigned 4 January 2024)
Sponsor
49 Dawson Street
Dublin 2
Ireland
PetroNeft Resources plc
Company Information (continued)
[3]
Broker
Davy (Resigned 4 January 2024)
49 Dawson Street
Dublin 2
Ireland
Principal Bankers
AIB Bank (Resigned 5 August 2024)
1 Lower Baggot Street
Dublin 2,
Ireland
Legal Advisers
JLC Advisory
North Yorkshire
BD24 OHZ
United Kingdom
Registered Number
408101
Registrar
Computershare (Resigned 29 May 2024)
3100 Lake Drive,
Citywest Business Campus,
Dublin 24, D24 AK82,
Ireland
PetroNeft Resources plc
[4]
Board of Directors
David Sturt – (Executive Chairman from 21st October 2022, previously Chief Executive Officer) (Age 62)
David was appointed a Non-Executive Director of the Company in April 2016 and became Chief Executive Officer on 25 March
2019, subsequently resigning as Chief Executive Office to become Executive Chairman on 21 October 2022. He was a member of
the Remuneration Committee up until his appointment as CEO. David has over 35 years international experience in the oil and
gas industry gained working on projects in Europe, CIS, Africa, and SE Asia in a variety of senior technical and managerial positions
at Conoco-Philips, Hess, PetroKazakhstan, Exillon Energy, Ukrnafta and Azimuth Energy. In 2010 he was a founding partner in
VistaTex Energy which built a portfolio of producing assets across the onshore US, the company was later successfully sold to
Dome Energy in 2014. In June 2022 he resigned his position as a non-Executive director of Petrosibir AB, a Swedish Company with
oil and gas interests in the Bashkiria and Komi regions of Russia. David holds a BSc honours degree in Earth Sciences from Kingston
University, an MSc degree in Exploration Geophysics from Leeds University, and a postgraduate diploma in business
administration from Heriot Watt University.
Pavel Tetyakov – (Chief Executive Officer from 21st October 2022, previously Senior Vice President Business Development and
Executive Director) (Age 45)
Pavel was appointed to the Board as an Executive Director in January 2020 and resigning that role to become Chief Executive
Officer on 21 October 2022. He has 20 years of experience in senior and top management positions working for a variety of E&P
companies including: PetroKazakhstan, Exillon Energy, Ukrnafta, Sibgasoil and Petrosibir. His main areas of expertise are M&A
and operations management. He negotiated the acquisition of several licences in PetroKazakhstan, was responsible for building
the asset portfolio of Exillon Energy, managed divestment of Sibgasoil oil fields in several regions of Russia and led the
transformation of Petrosibir that resulted in improved operational performance and new oil field discoveries. He joined the
Company in May 2016 as Vice-President Business Development. In July 2018 Mr Tetyakov took over the management of the
Russian subsidiaries of PetroNeft as General Director. In October 2022, Pavel became the Company’s CEO. Pavel holds a Bachelor
of Arts degree in Business Administration from Budapest University of Economic Sciences and Public Administration
Anthony Sacca – (Independent Non-Executive Director) (Age 53)
Anthony was appointed an Independent Non-Executive Director of the Company in April 2016. He was chairman of the Audit
Committee. He is principal of Karri Tree Executive Coaching. Anthony was previously the Chief Financial Officer of Rolf Group of
Companies, one of Russia’s largest independent automotive distributor/retailers. Prior to that he was a Partner with PwC in
Moscow. Anthony is a Fellow of the Institute of Chartered Accountants in Australia and New Zealand. He holds a Bachelor of
Business and Administration (Distinction) from Curtin University of Technology Perth, Australia. He is a member of the Russian
Independent Directors Association and is a Fellow Chartered Director with the Institute of Directors in the United Kingdom. He
resigned on 4 January 2024
Daria Shaftelskaya – (Non-Executive Director) (Age 46)
Daria was appointed a Non-Executive Director in January 2020. She has 20 years of experience in the oil & gas exploration and
production business within the West-Siberian basin (Tomsk region). More recently she has been working as chief financial officer
in several Russian companies including: "Finco", "Hermes - Moscow" and "Sever" where she was primarily focused on oil & gas
trading and operational facilities construction in the West Siberian region. She holds a degree in economics and engineering from
Tomsk Technical University (1999) and a Master’s Degree in Economics also from Tomsk Technical University (2001).
Eskil Jersing – (Independent Non- Executive Director) (Age 59)
Eskil was appointed as an Independent Non-Executive Director on 1 November 2021. He is an Oil Industry Senior Executive with
35 years of International E&P experience in most of the world’s key Petroleum basins, including the North Sea, DW Gulf of Mexico,
Brazil, Africa, and SE Asia. He has had various Upstream Exploration and New Business focused roles with Enterprise Oil, Shell,
Marathon Oil, Apache corporation and Petrobras oil and Gas BV. He was most recently the CEO of Wentworth Resources plc, and
CEO of Sterling Energy plc, both AIM listed Africa-focused E&P Companies. In addition to his role at PetroNeft Resources plc, he
is a New Business Advisor to Eburon Resources LLC, a privately backed Exploration startup, on the Advisory panel of Energilink
Ltd and a Director of Eskoil Ltd. Mr. Jersing graduated with a BSc. in Geophysics from Cardiff University, and an MSc. in Petroleum
Geology from Imperial College London. He resigned on 4 January 2024.
PetroNeft Resources plc
Board of Directors (continued)
[5]
Michael Power – (Independent Non- Executive Director) (Age 58)
Michael was appointed as an Independent Non-Executive Director on 4 January 2024. He is a veteran of emerging markets, with
key focus on Financial and Compliance matters in Russia and Central Asia. A Senior Executive with over 35 years of experience in
new business opportunities emerging markets, predominately tobacco, telecoms, retail, and oil and gas. He is a fellow of the Irish
Institute of Chartered Accountants in Ireland.
PetroNeft Resources plc
[6]
Highlights
Operations – Corporate Strategy On 12 October 2023, at EGM of the Company, shareholders
agreed to dispose of all Russian Assets to Pavel Tetyakov, PetroNeft’s current C.E.O.
•
In a climate of every increasing international sanction, the Company liquidity position became more
challenging.
•
Due to the situation in Ukraine and widening sanctions regime, combined with restrictions on
available funding engagement with third party professional service providers especially Auditors,
Bankers, the Share Registrar and Legal firms became impossible.
•
Following strategic asset review first announced November 2022, the Board and Management
focused on the timely sale of PetroNeft’s Russian assets combined with negotiations to reduce the
company’s debt.
Finance
•
Increase in Gross debt 2023 US5,940,602 (2022: US $5,289,349)
•
Increase in trade and other payables to US$2,263,610 (2022:US$ 1,580,175)
•
Reduction in Cash and cash equivalents US8,420 (2022: US $94,483)
•
Expected reduction in receipts from disposal of Russian assets, due to a deterioration in the ruble /
dollar exchange rate, US$ 1,396,550 (2022: US$1,707,896)
•
Successfully engaged with the Companies loan note holders.
ESG
•
The company maintained its safety record with zero lost time incidents in 2023 (2022: zero).
Outlook
•
Due to increasing challenges created by the Ukraine/Russia conflict, strategic review announced by
the Board on 25 November 2022, PetroNeft’s Russian assets will be sold to Pavel Tetyakov the current
Chief Executive officer. On 12 October 2023, the proposed disposals had been approved at
Extraordinary General Meeting with 88% of votes cast in favor. During the 9 and 11 June 2024,
payment for the sale of Lineynoye LLC had been successfully remitted to PetroNeft’s bank account in
Dublin.
•
PetroNeft’s equities are delisted on both the Dublin Euronext and London A.I.M. markets, as of 4
January 2024. The Company was not in a position to complete audited financial statements for FY
2022 within the required time frame.
•
At the time of signing these financial statements, PetroNeft’s banker’s Allied Irish Banks plc has
withdrawn all and any banking services to PetroNeft. Despite Management’s best endeavors to
maintain the banking relationship, Allied Irish Banks plc under the contract terms unilaterally
suspended services to PetroNeft and did not provide any reasonable rationale for their decision.
•
The exit from Russia means the Company will become a cash shell, and the Board and Management is
committed to working with all payables on a proactive basis.
•
The financial statements included here are prepared on a basis other than a Going Concern basis. It
is the opinion of the Directors, depending on legal advice and financial capacity, that the Company
will either be liquidated or continue to exist in a non-trading capacity.
PetroNeft Resources
Chairman’s Statement continued
[7]
Chairman’s Statement
Dear Shareholders,
The earlier optimism we had for 2022, sadly was misplaced, given the tragic events that unfolded in Ukraine at
the start of 2022. The adverse effects of the Ukrainian conflict were compounded as we exited 2022 and entered
2023 in an environment where the Company to the best of its knowledge-maintained compliance with a rapidly
evolving sanction regime, against a background that the Company’s liquidity all but dried up.
A direct result of the Ukrainian Russian conflict was that through 2022 and into 2023 it became increasingly
challenging to operate the Company. As reported on the 25 September 2022, our former auditor (BDO) since
2019 informed us that they would not be able to carry out our 2022 audit due to the Ukrainian Russian conflict.
As the international sanctions against Russia intensified in quantum and application, it became increasingly
obvious that professional service companies were no longer able or willing to even consider retaining PetroNeft
as their client. Amply illustrated by the inability of PetroNeft to retain Irish legal advisers and the resignation of
our auditors (BDO) and more recently during 2024 our bankers Allied Irish Banks plc, unilaterally withdrew their
banking services to the Company.
Given the adverse events noted above and the continuing challenging environment, we owe a duty to all our
stakeholders to continue to operate as best we can. Accordingly, the ultimate goal and focus of the Company
has been to: manage the Sale of the Company’s Russian assets in an orderly and compliant fashion; investigate
any potential to sell PetroNeft, given its Irish residency and any tax losses if they can be determined with
reasonable certainty and are available for future offset; engage with the Company’s remaining trade creditors
on a full and final settlement basis.
Corporate Development
2023 saw no Board changes for the company. As of 4 January 2024, both Anthony Sacca and Eskil Jersing resigned
their roles as Non-Executive Directors. At that time, in addition to the role as Company Secretary, Michael Power
FCA, assumed the role of Executive Director.
Strategy
Our strategy has historically been focused on improving shareholder value by increasing production, cash flow
and reserves. The conflict in Ukraine has meant that this strategy is no longer possible. Also, it has become
increasingly apparent that if we had continued to try to maintain our assets in Russia, then the Company would
eventually be forced into insolvency.
It was against this backdrop that we announced on 25th November 2022, a strategic asset review which has led
to the recent EGM on 12th October 2023 where 88% of the shareholders voted in favour of the Company
disposing of its entire Russian portfolio with the key assets being 90% of Licence 67 and 50% of Licence 61. After
a lengthy sales process, the only bidder for the assets was Pavel Tetyakov, the current Chief Executive Officer of
PetroNeft.
Whilst this is a very sad time for PetroNeft, it is recognised that this was the only way that the Company had a
chance to free up liquidity to meet outstanding payables, including discharging long-term debts, salaries and
fees owed to Management and Directors, and work proactively with trade creditors and payables.
The exit from Russia, means the Company will become a cash shell, and Management is committed to working
with all payables on a proactive basis, until such time it is acquired by a third party as a shell company or wound
down in an orderly manner.
PetroNeft Resources
Chairman’s Statement continued
[8]
Summary
The Company has been and continues to be going through incredibly challenging times which are threatening
its very existence. Accordingly, this Annual Report and Financial Statements are prepared on a basis other than
Going Concern.
Finally, I know that I speak for all of the Directors, management, and staff of the Company in giving sincere
thanks to our shareholders for your continued support throughout this past year.
David Sturt
Executive Chairman
PetroNeft Resources
Chief Executive Report continued
Chief Executive Officer's Report
Dеаr fellow shareholders, the Company's operational реrfоrmапсе was significantly adversely affected Ьу а
combination of events. At Licence 61, the shutdown of the Nоrd lmреriаl pipeline on the 29Augusl2022 resulted
in production frоm the licence having to Ье shut in. At Licence 67, the Company was rеаdу to start а multi we|l
development drilling campaign at the Cheremshanskoye field, this had to Ье halted due to the Ukrainian Russian
conflict. These two key ореrаtiопs events wеrе previously rероrtеd in PetroNeft's 2022 Аппчаl Rероrt.
The rollout of international sanctions against Russia in the wake of the Ukrainian Russian conflict directly
impacted the ability of PetroNeft to continue operations, including the development drilling рrоgrаm on Licence
67, The рrе conflict funding plan was to seek funding of the development drilling plan frоm а Russian bank,
which ultimately was sanctioned along with many other Russian banks that have been approached еаr|iеr. ln
addition, sanctions made it impossible fоr PetroNeft to supply any investment funds even if they wеrе avai|able.
2023 Review
Given the circumstances noted above, management worked hаrd to continually focus on cost reduction and
optimisation across alI levels in an environment of diminishing and restricted liquidity. Remittances from Russia
fоr reimbursement of CMSA costs wеrе severely restricted, ln addition, Management has had to navigate an
increasingly restrictive and difficult ехtеrпаl geopolitical епчirопmепt. Mahagement also worked closely with
personnel and improved contractual arrangements with contractors and suppliers.
conclusions
The operating background noted above created significant рrеssчrе and uncertainty about the Company's ability
to SUrviче unless it took steps to disposes of its Russian assets.
Whilst the sale of the Company's Russian assets is а sad event, after carrying out а strategic asset rечiеw first
announced on 23'd September 2022,it was the only viable option available to the Company.
l would like to take this opportunity to thank оur shareholders for their patience and support. l would a|so like
to thank all оur staff who have had to sacrifice significant amounts of their remuneration as well displaying grеаt
dedication to the Соmрапу Ьу their willingness to wоrk fоr considerable periods of time when there was а
significant chance that we may not have been able to meet even раrt of the rеmuпеrаtiоп due. Тhrочgh these
times they displayed great professionalism, commitment, and dedication through the challenges of 2023 and
into 2024. Their hаrd work and с
enabled the Company to survive
combined with the continued support frоm очr shareholders has
Pavel
chief Executive
fаr.
t9]
PetroNeft Resources plc
[10]
Financial Review
Review of PetroNeft consolidated income statement for the year
Company Income Statement
For the year ended 31 December 2023
Note
2023
2022
US$
US$
Revenue
5
611,521
859,666
Cost of sales
-
-
Gross profit
611,521
859,666
Administrative expenses
(1,726,339)
(3,260,875)
Operating Profit/(Loss)
7
(1,114,818)
(2,401,209)
Finance Income
8
5,084,623
3,680,578
Finance costs
9
(651,253)
(709,482)
Impairment of financial assets- investments in joint
ventures and subsidiaries
12
-
(16,180,007)
Impairment of financial assets- loans at amortised cost.
13
(5,084,623)
(24,324,057)
Valuation of gains/ (losses) on fair value through profit
and loss on debt instruments
-
(20,199)
Profit/(Loss) for the year for continuing operations
before taxation
(1,766,071)
(39,954,376)
Taxation
10
6,980,112
(907,764)
Profit/(Loss) for the year
5,214,041
(40,862,140)
Company Statement of Comprehensive Income
Profit/(Loss) for the year attributable to equity holders
5,214,041
(40,862,140)
Other comprehensive income
-
-
Total comprehensive Profit/(Loss) for the year
attributable to equity holders
5,214,041
(40,862,140)
PetroNeft Resources plc
Financial Review (continued)
[11]
Revenue
PetroNeft performs the role of operator for both the licences 61 and 67 joint ventures. This means that PetroNeft employees and
management are responsible for the day to day running of both Licences. Major strategic and financial decisions relating to Licence
61 and 67 require unanimous approval by both joint venture partners.
As operator, PetroNeft Holding is entitled to charge certain administrative, management and technical costs to its joint venture
WorldAce Investments Limited and its 90% subsidiary Russian BD Holdings B.V. The costs associated with this revenue are included
in Administrative Overhead. In 2023 PetroNeft Group charged a total of US$611,521 (2022: US$859,666) in respect of such
management services.
The substantial reduction of 29% in CMSA costs is in line with Management’s commitment to continually reduce costs where
possible
Margins
The reported gross profit for the year was US$611,521 (2022: US$859,666)
Operating losses totalled US$1,766,071 (2022: US$39,954,376). During FY 2023, the Company charged to administrative expenses,
a sum of US$311,346, being the forex losses accruing on the disposal of PetroNeft’s Russian subsidiary assets, as it marked the
rouble denominated transaction to dollars at year end. For FY 2022 a sum in the amount of US16,180,007 represented the write
down of the assets to be sold at the agreed Sales Price. In addition, the disposal of PetroNeft’s joint venture interest in the Cypriot
registered WorldAce Investment Limited, the Joint venture loans, which to that point would have been recovered out of sale of
Licence 61, or a farm down are deemed to be fully impaired. The impairment charge on joint venture loans is US$5,084,623 (2022:
US$24,324,057). The Company continues to accrue finance income on the WorldAce Investment Limited loans, and then
immediately impairs them. There is per the SPA, a contingency asset that may be recoverable 12 months after signing the SPA.
More detail of which is contained in Note 29 to these Financial Statements.
Given as noted above, there is no reasonable expectation that Intercompany loans or their associated interest receivable amounts
will be recovered, given the sale of PetroNeft’s Russian assets, during FY 2023, the historic total deferred taxation accrual of
US$6,980,112 was reversed. In FY 2022 the deferred taxation accrual was US872,554.
The profit after taxation for the year was US$5,214,041 versus a reported FY 2022 loss of US$40,862,140. The profit amount
derives from a reversal of prior year tax charges and is not indicative of an improved operating environment.
Finance Income
The Finance income relates to interest receivable on loans to the joint ventures. During 2023 PetroNeft recognised interest income
of US$5,084,623 (2022: US$3,638,736) on its loans to WorldAce Group and on its loans to Russian BD Holdings B.V pre
consolidation US$Nil (2022:US$3,638,736)
Finance Costs
Finance costs relate to interest due on loans from Petrogrand AB, and on separate convertible loans issued in June 2019, and in
February 2021. In addition, a further loan arose and became payable to Belgrave Naftogas B.V, arising out of funding provided to
the PetroNeft on the acquisition of an additional 40% equity holding in Russian BD Holdings B.V.
Given PetroNeft has elected to dispose of its Russian assets, post a strategic review, first announced on 25 November 2022,
Management has worked with the loan note holders to agree revised amounts and terms which are payable on full and final
settlement of all loan monies outstanding, post receipt of the monies from the Sale of the Russian assets. For more information
on the revised terms and conditions, please see Note 18.
Review of Statement of Financial Position as at 31st December 2023.
Financial Assets- loans
The balance reported in the Statement of ‘Financial Position under Financial Assets’, represents the loans to the joint venture
company WorldAce Investment Limited of US$Nil (2022: US$Nil). It was understood that the loan balance would ultimately have
PetroNeft Resources plc
Financial Review (continued)
[12]
been repaid out of the sale/farm down or development of the underlying asset, Stimul T LLC, the Russian registered legal entity,
which owns the operating Licence 61. WorldAce Investment Limited is a Cypriot registered legal entity, and parent company to
Stimul T LLC. On 12 October 2023, the PetroNeft shareholders at an Extraordinary General Meeting, agreed by 88% to 12%, to
accept for US$1.00 (One dollar) the sale of PetroNeft’s 50% equity interest in WorldAce Investment Limited to Pavel Tetyakov,
PetroNeft’s current Chief Executive Officer, plus 10% of any shareholder debts, including shareholder loans and CSMA costs if
repaid within 1 year of signing the Sales Purchase Agreement. On 10 May 2023, Stimul T LLC filed for bankruptcy administration.
Accordingly full provision reported at 100% is recorded against the book value of the loan payable to PetroNeft by WorldAce
Investment Limited.
Trade and Other Receivables
There was a significant reduction in Trade and Other Receivables of US$62,208. As at 31 December 2023, US$32,275 (2022:
US$94,483).
Assets associated with Assets held for sale
Following a strategic asset review in FY 2022, a decision was taken by the Board to actively promote the sale of all its Russian
Assets. Following an exhaustive sales process, indicative offers were received from only Pavel Tetyakov, the current Chief
Executive Officer of PetroNeft. The expected transactions which are denominated in Roubles, initially was recorded in the FY2022
Company’s books at $US1,707,896. Owing to adverse foreign exchange movements during FY 2023, the reported expected
transaction proceeds were revalued to US$1,396,550 as of 31 December 2023.
Called Up Share Capital and Share Premium Account
During 2023, there was no new shares issued during the fiscal year (2022: Nil),
Interest Bearing Loans and Borrowings
Movement in Interest Bearing Loans and Borrowings can be accounted for as follows:
•
Automatic extension of all PetroNeft’s Loans pending completion of the Sale/Purchase transaction of its Russian assets.
•
Per note 18, points 1-4, Management has secured from the loan note holders, significant concessions on loan balances
and the associated terms and conditions, provided amounts agreed are paid out within 7 business days of receipt by
PetroNeft of the sale proceeds for its interest in Licence 67. The concessions include cancellation of all, and any charges
held by Petrogrand AB, the cancellation of all interest accrued across all loan types, and full and final payment of 30% of
the principal amount on the Petrogrand AB Loan and 10% on all other loan types. In addition, on exercising the revised
terms, Petrogrand AB will acquire the right but not the obligation to acquire an additional 65 million ordinary shares in
the Company. Final payments will be subject to Russian withholding tax and any adverse exchange rate movements.
Current and Future Funding of PetroNeft
The Company has net current liabilities at the year-end of US$6,766,976 (2022: US$3,996,118) as per the Statement of Financial
Position on page 25. The valuation ascribed to the assets and liabilities, is post a Strategic Asset review, first announced on 25
November 2022, and firmed up on 12 October 2023, when the shareholders at an extraordinary general meeting of PetroNeft
agreed by 88% to 12%, to dispose of its Russian assets to Pavel Tetyakov.
The Company continually tries to minimise its costs, especially in the present situation. The Directors and Management have
agreed to reduce and defer significant portions of their remuneration and will continue to manage its trade creditors and accruals.
The Company has met with all loan note holders and as indicated in Note 18 – Loans and Borrowings, has secured favourable
terms for full and final settlement, plus the cancellation of onerous charges.
Going Concern
Cash on hand.
As at 31st December 2023, PetroNeft had cash and cash equivalents of US$32,275 (2022: US$94,483). A comprehensive review of
all cash inflows and outflows is contained in the Statement of Cash Flows on page 27 of the Annual Accounts.
PetroNeft Resources plc
Financial Review (continued)
[13]
Improving liquidity in the near term.
The Board acknowledges PetroNeft’s near term financial position is highly dependent on completion of the sale of its Russian
assets to Pavel Tetyakov. Accordingly, the focus for FY 2023, was to complete the sale process in a timely and legally compliant
manner. The proceeds for the sale of Lineynoye LLC was successfully received by PetroNeft on the 9 and 11 July 2024. Gross
proceeds, including Belgrave Naftogas B.V. share, 10% equity holding in Russian B.D. Holding B.V., amounted to US$1,590,457.
Proceeds received will be used to; discharge the note loan holders at both a Company and at a Russian BD Holding B.V. level, pay
reduced amounts on a full settlement basis, amounts owing to the Directors and Management. The remaining balance will be
used to manage trade creditors and support the business’s operating costs going forward as it attempts to secure alternative
business opportunities, completes necessary legal and reporting requirements and in the absence of securing alternative business
opportunities, liquidate the Company or keep in existence as a non-trading Company.
Accordingly, the Board has decided to prepare the PetroNeft Annual Report and Financial Statements as that of PetroNeft Holding
and the basis for preparation is other than that of Going Concern.
Controlling expenditure.
PetroNeft continues to manage expenditures in line with the Company’s commentary as reported under the heading “Improving
liquidity in the near term”, as reported above.
Proactive liquidity management and cost control.
Include the following:
•
Secured from all loan note holders, substantial wavering of charges, plus significant write down of Principal and Interest
amounts on full and final settlement, as reported on in Note 18 – Loans and Borrowings. Write downs will be confirmed
on payout of agreed final amounts.
•
Renumeration amounts owing to key Management increased in the reporting period from US$1,097,010 in FY 2022 to
US$1,812,647 in FY 2023, as per Note 23 related party transactions.
•
Expected outgoings, at the dates of the respective Statement of Financial Position is captured in Note 20 ‘Financial Risk
Management Objectives and Policies’, subsection ‘Liquidity Risk Management’. The subsection term amounts are for full
and final settlement. Total disbursements are projected in the region of US$1,396,550 (2022:US$ 1,707,896). The
amounts reported are considerably less than those amounts reported outstanding as of 31 December 2023 for total
interest-bearing loans and borrowings and trade and other payables which amount to US$8,204,221
(2022:US$6,952,696).
•
Secured the sale of the Company’s Russian assets to Pavel Tetyakov. The Sale Proceeds from the disposal of Lineynoye
LLC were remitted to PetroNeft’s bank account in July 2024.
The Parent Company’s total liabilities, excluding provisions for deferred taxation, exceed its total assets by US$6,766,976
(2022:US$5,000,905)
This represents material uncertainty that casts significant doubt upon the Company’s ability to continue as a going concern as
described in Note 2 to the Financial Statements. The Company has built solid business relationships with all its stakeholders and
will leverage those relationships to proactively manage liquidity on key business need requirement when dealing with loan
holders, third party trade creditors and staff.
Focussed asset management and capital allocation:
PetroNeft continually updates its business plans, especially in light of its decision to exit the Russian marketplace.
Principal risks and uncertainties
The Board monitors all risks to PetroNeft on a regular basis using information obtained or developed from external and internal
sources and will take actions as appropriate to mitigate these. PetroNeft utilises a risk management approach that identifies key
business risks and measures to address those critical to our operating environment in Russia. Accordingly, given the current
sanction regime in place, and the inability to fund the development of its Russian assets, PetroNeft has been forced to exit Russia.
PetroNeft Resources plc
Financial Review (continued)
[14]
Other significant elements of the risk management approach include regular Board reviews of the business, a defined exit process
that adheres to local regulatory compliance in both Ireland and Russia, monthly management reporting, financial operating
procedures and policy, due attention to HSE and anti-bribery and corruption systems.
The Company had established a comprehensive list of principal risks and uncertainties and the actions needed by the management
team to mitigate these risks and uncertainties. This being part of our good business practises. However, the comprehensive
systems in place did not prevent the collapse in the value proposition that was PetroNeft Resources plc, due to the onset of the
war in Ukraine by Russia and the rollout of international sanctions. Best described as a once in a lifetime adverse event, liquidity
dried up, no alternative funding needs could be sourced and be sanction compliant. The appetite for Russian assets became
negligible, the focus shifted to cash generating assets. Against a background of ever-increasing debt, of non-engagement by third
party professional companies, and the real understanding that each round of further sanction became even more prohibitive, the
Company’s know Country risks and risk issues became its reality, and the only feasible mitigation was to dispose of the Company’s
Russian assets. Clearly with the sale of the Company’s Russian assets, most of the other risks, while effective in a proper
functionally operating environment are less so, when the Company’ assets are being sold. The principal risks and uncertainties are
available for review on the Company’s website, by clicking on the attached link, or copy and paste the attached link into a web
browser. http://petroneft.com/upload/iblock/06a/06a0d7603c177498ef08206cde0a0a80.pdf.
Significant Shareholders
The Company’s share register was migrated post Brexit to Euroclear Nominees Limited (Belgium) from CREST U.K. as of and
from March 15, 2021.
So far as the Directors are aware, the names of the entities, other than serving Directors, who directly or indirectly, maintain an
interest of 3% or more of the Issued Share Capital as at 30 September 2024, as per the share register is as follows:
Name of Shareholder
Percentage
Shares
Natlata Partners Limited*
25.7%
275,503,451
Mr. Lloyd Wiggins
14.46%
154,974,339
J&E Davy
6.6%
71,128,048
Seguro Nominees Limited
5.4%
58,280,564
* Shares held by Natlata Partners Limited are beneficially owned by Maxim Korobov and the Directors are aware a further holding
of 108,956,061 are held by Six Sis Olten AG for Maxim Korobov, bringing his total shareholding to 25.7%.
.
[15]
PetroNeft Resources plc
Directors’ Report
for the year ended 31 December 2023
The Directors present herewith their Annual Report and the un-audited financial statements of PetroNeft (“PetroNeft”,
“the Company”,) for the year ended 31 December 2023.
Principal Activity
The principal activities of the Company are that of oil and gas exploration, development, and production in Russia. The
Company’s assets are represented by equity holdings through intermediary companies, of two blocks being Licence 61 (50%
interest, held through a joint venture, WorldAce Investments Limited, a Cypriot registered entity) and Licence 67 (90%
interest, held through Russian BD Holdings B.V. an entity registered in the Netherlands).
Results and Dividends
The loss for the year before tax amounted to US$1,766,071 (2022: US$39,954,376).
The Directors do not recommend payment of a final dividend, and no interim dividend was paid.
Review of the Development and Performance of the Business
In compliance with the requirements of the Companies Act 2014, a fair review of the performance and development of the
Company’s business during the year, its position at the year-end and its prospects is contained in the Chairman’s Statement on
pages 7 to 8, the Chief Executive Officer’s Report on page 9 and the Financial Review on pages 10 to 16.
Corporate Governance.
The Company is not subject to the UK Corporate Governance Code applicable to companies with full listings on the Dublin and London
Stock Exchanges. The Company has adopted and intends, in so far as is practicable and desirable, given the size and nature of the
business and the constitution of the Board, to comply with the 2018 QCA Corporate Governance Code (the “QCA Code”) as
published by the Quoted Companies Alliance (the “QCA”), and strives to adhere to the Code, even in circumstances were the
Company is no longer listed on either the London A.I.M. or Dublin Euronext markets.
The measures taken by the Company to adhere where possible with the 2017 QCA code is listed on the Company’s website -
http://petroneft.com/upload/iblock/06a/06a0d7603c177498ef08206cde0a0a80.pdf. It should however be understood that due
to the constraints placed on the company as a direct result of the Russian – Ukrainian conflict, it has however been impossible to
adhere to the QCA code in full.
The QCA Code was devised, in consultation with several significant institutional small Company investors, as an alternative
corporate governance code applicable to Small and Mid-Size Quoted Companies. An alternative code was proposed because the
QCA considered the UK Corporate Governance Code to be inappropriate to many Small and Mid-Size Quoted Companies.
Directors
The Directors who served during the year are listed on page 2.
In accordance with Article 89 of the Articles of Association of the Company, Pavel Tetyakov and Daria Shaftelskaya are due to
retire by rotation at the next AGM and are eligible to offer themselves for re-election.
PetroNeft Resources plc
Directors’ Report
for the year ended 31 December 2023
[16]
Directors, Company Secretary, and their Interests
The Directors and Company Secretaries who held office during 2023 and in the period up to 30 September 2024 had no interest,
other than those shown below, in the Ordinary Shares of the Company. All interests shown below are beneficial interests.
Ordinary Shares
Ordinary Shares
Ordinary Shares
As at
As at
As at
30 September
2024
31 December 2023
1 January 2023
98,164,020
98,164,020
98,164,020
26,094,132
26,094,132
26,094,132
15,637,515
15,637,515
15,637,515
768,807
768,807
-
-
-
-
-
-
-
Directors
Daria Shaftelskaya*
David Sturt
Pavel Tetyakov
Eskil Jersing (appointed 1 November 2021)
Anthony Sacca
Company Secretary
Michael Power
-
-
-
**Shares held by Daria Shaftelskaya in her own capacity and on her behalf by National Securities Depository Russia.
Principal Risks and Uncertainties
The Company has a risk management structure in place which is designed to identify, manage, and mitigate business risks. Risk
assessment and evaluation is an essential part of the internal control system.
Details of the principal risks and uncertainties affecting the Company as required to be disclosed in accordance with the Companies
Act 2014, are listed on pages 13-14
Going Concern
The appropriateness of continuing to prepare the financial statements on a going concern basis is discussed in detail in the Finance
Review on page 12 in the paragraphs related to the “Current and future funding of PetroNeft” and - “Going Concern”, pages 12-
13 for “Improving liquidity in the near term” and “Proactive liquidity management and cost control” and in Note 2 to the financial
statements on pages 29-30.
The circumstances outlined in the Finance Review on Pages 12-13 and Note 2 to the financial statements on pages 29-30, represent
material uncertainties that cast significant doubt upon the Group and the Company’s ability to continue as a going concern. After
making enquiries, and considering the uncertainties described in the Finance Review and Note 2, the Directors believe it is not
appropriate that the Company should adopt the Going Concern Concept in preparing these Financial Statements. Depending on
engagement with third party service Companies, Legal and Compliance requirements, and funding available the Directors intend
to either liquidate the Company or keep it in existence as a non-trading entity. Accordingly, the financial statements have been
prepared on a basis other than Going Concern as outlined Note 2.
Remuneration Committee Report
The Company’s policy on senior executive remuneration was designed to attract and retain people of the highest calibre who
could bring their experience and independent views to the policy, strategic decisions, and governance of the Company.
Noteworthy, in the context of managing the Company through the current crisis, the Company has relied on the dedication and
professionalism of the current management and staff who have worked at times despite at times having no certainty about what
remuneration if any they would receive due to the financial constraints imposed on the Company.
In setting remuneration levels, the Remuneration Committee takes into consideration the remuneration practices of other
companies of similar size and scope. A key philosophy is that staff must be properly rewarded and motivated to perform in the
best interests of the shareholders. Bonuses for Executive Directors are based on performance targets which include elements
relating to operational outcomes and individual performance. However, as noted elsewhere in this Annual Report, the Board and
PetroNeft Resources plc
Directors’ Report
for the year ended 31 December 2023
[17]
Management have taken significant cuts to their packages, and experienced significant, multiyear delays in getting paid out, when
final balances are agreed.
The Company did not have a share option scheme in place during the 2023 financial year.
Directors’ Accrued Remuneration (US$)
Executive Directors includes the amounts accrued but not paid for Directorships, plus also for fees accrued but not paid for the
roles as Chief Executive Officer.
Executive Directors includes the amounts accrued but not paid for the role of Director but also for fees accrued but not paid for
the roles as Chief Executive Officer as of 31 December 2023 US$1,325,100 (2022: US$817,943), The amount owing to Directors
continues to increase, which is significant equating to approximately 2 years renumeration not paid out as of the reporting date.
Final payout is expected to much less than accrued amounts.
As part of the agreed Sale / Purchase agreement it is expressly understood that the monies owing to Pavel Tetyakov are reduced
to nil, monies owed to David Sturt will be reduced as the termination fees will be marked to zero and any remaining payout will
be as determined by cashflow and business priorities, ultimately resulting in final amounts paid out to be reduced further,
significantly.
2023
2022
Director
Basic
Pension
Total
Basic
Pension
Total
Executive directors
David Sturt*
32,784
-
32,784
527,946
36,940
564,886
Pavel Tetyakov
404,200
30,000
434,200
243,437
17,943
261,380
436,984
30,000
466,984
771,383
54,883
771,383
Non-executive directors
Alastair McBain
-
-
-
22,416
-
22,416
Daria Shaftelskaya
22,100
-
21,029
21,029
-
21,029
Anthony Sacca
22,100
-
21,029
21,029
-
21,029
Eskil Jersing
22,100
-
21,029
21,029
-
21,029
66,300
-
66,300
85,503
-
85,503
Total Directors
remuneration
503,284
30,000
533,284
856,886
54,883
911,769
*Includes termination fees on retiring as PetroNeft’s Chief Executive officer of US$Nil (2022:US$188,628) accrued but not paid
and Medical Insurance premiums of US$3,392 (2022: US$13,171)
Political Donations
The Company did not make any political donations during the year.
Important Events after the Balance Sheet Date
The onset of the Russian / Ukrainian conflict, which has led the global community to the imposition of substantial and penal
sanctions on the Russian government and its officials. The sanctions led to prohibitions on doing business in any meaningful
commercial way in Russia. These sanctions continued to evolve through 2024.
.
PetroNeft Resources plc
Directors’ Report
for the year ended 31 December 2023
[18]
On the 30 June 2023, the Company announced suspension of trading of its equities on both the A.I.M. and Euronext markets
pending publication of its audited annual report for FY 2022. Dealings in the Company's ordinary shares was therefore suspended
from 7.30 a.m. on Monday 3 July 2023 until such time as the Audited Accounts would have been duly published. The Audited
Accounts were not published by 31 December 2023, and the Company’s admission to AIM and Euronext Growth was cancelled as
of 4 January 2024.
On the 29 May 2024, Computershare withdrew its services as Registrar to the Company.
On the 9 and 11 July 2024, the Company received monies for the sale of LIneynoye LLC. Accordingly, the sale of Lineynoye LLC is
now complete.
On the 2 August 2024, per the updated Share Certificate, provided by the Cypriot Registrar of Companies, Pavel Tetyakov replaced
PetroNeft Resources plc as equity holder, in the joint venture WorldAce Investments Limited.
On the 4 August 2024, Allied Irish Bank plc, withdrew its banking services to PetroNeft Resources plc.
Computershare (provided the Company with shareholder register services) terminated its service provision which included
disablement of the ISIN within Euroclear Bank system, this process was finalised on 13 of September 2024. Computershare
processed transactions through Euroclear bank up to that date and provided the Share Register to the Company on the 19
September 2024 which reflects the final position per Computershare on their records of the equity holders in PetroNeft as of 13
September 2024.
Through November 2024, the Company discharged obligations owing to its Debt Holders, management, with the exceptions of
monies owing to Pavel Tetyakov and Natlata Partners Limited, came to full and final settlement agreement terms with non-related
third-party payables, with the exception of Computershare Services, the then share registrar on record and made part payment
of fees and salaries owing to Management and staff.
Accounting Records
The measures taken by the Directors to ensure compliance with the requirements of Sections 281 to 285, Companies Act 2014,
regarding accounting records are the implementation of necessary policies and procedures for recording transactions, the
employment of competent accounting personnel with appropriate expertise and the provision of adequate resources to the
financial function. The accounting records of the Company are maintained at 20 Holles Street, Dublin 2, Ireland.
Directors’ Compliance Statement
It is the policy of the Company to comply with its relevant obligations (as defined in the Companies Act 2014). The Directors have
drawn up a compliance policy statement (as defined in section 225(3)(a) of the Companies Act 2014) and arrangements and
structures are in place that are, in the Directors’ opinion, designed to secure material compliance with the Company’s relevant
obligations. The Directors confirm that these arrangements and structures were reviewed during the financial year. As required
by Section 225(2) of the Companies Act 2014, the Directors acknowledge that they are responsible for the Company’s compliance
with the relevant obligations. In discharging their responsibilities under Section 225, the Directors relied on the advice both of
persons employed by the Company and of persons retained by the Company under contract, who they believe have the requisite
knowledge and experience to advise the Company on compliance with its relevant obligations.
Directors’ Responsibilities Statement in Respect of the Financial Statements
The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law
and regulations.
Irish Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with IFRSs as adopted by the European Union. Under Company
law the Directors must not approve financial statements unless they are satisfied, they give a true and fair view of the assets,
PetroNeft Resources pie
Directors' Report
for the year ended 31 December 2023
liabilities, and financial position, of the Company as at the end of the financial year, and the profit or loss for the Company for
the financial year, and otherwise comply with the Companies Act 2014.
In preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently.
•
make judgements and estimates that are reasonable and prudent.
•
state whether the financial statements have been prepared in accordance with applicable accounting standards, identify.
those standards, and note the effect and reasons for any material departure from those standards; and
•
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are responsible for ensuring that.the Company keeps or causes to be kept adequate accounting records which
correctly explain and record the transactions of the Company, enable at any time the assets, liabilities, financial position and
profit or loss of the Company to be determined with reasonable accuracy, enable them to ensure that the financial statements
and Directors' Report comply with the Companies Act 2014 and enable the financial statements to be audited. They are also
responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities. Legislation in Ireland governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions. The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website.
Disclosure of information to auditors
So far as each of the Directors in office at the date of approval of the financial statements is aware and subject to and ratification
of the auditor's appointment:
•
ALL relevant audit information is to be made available to the auditors if appointed.; and
•
The Directors have taken all the steps that they ought to have taken as directors to make themselves aware of any
relevant audit information and to establish that this information is disclosed to the Company's auditors if appointed.
This confirmation is given and should be interpreted in accordance with the provisions of Section 330 of the Companies Act 2014.
Auditors
At the time of drafting these financial statements no auditors had been appointed by the Company in accordance with the
provisions of the Companies Act 2014. due to the fact that there was no funding available to meet the Auditors fee. This arises
due to a combination of an unwillingness of Audit Companies to work with the Company combined with the financial constraints
under which the Company was operating, and the Board was unable to identify and appoint an auditor.
Approved by the Board on
David Stu rt
Director
16 December
2024
(19)
PetroNeft Resources pie
Company Income Statement
For the year ended 31 December 2023
Revenue
Cost of sales
Gross profit
Administrative expenses
Note
5
Operating Profit/(Loss)
7
Finance Income
8
Finance costs
9
Impairment of financial assets- investments in joint
ventures and subsidiaries
12
Impairment of financial assets- loans at amortised cost.
13
Valuation of gains/ (losses) on fair value through profit
and loss on debt instruments
Profit/(Loss) for the year for continuing operations
· before taxation
Taxation
Profit/(Loss) for the year
Company Statement of Comprehensive Income
Profit/(Loss) for the year attributable to equity holders
Other comprehensive income
Total comprehensive loss for the year attributable to
equity holders
Approved by the Board on
David Stu rt
Director
16 December 2024
10
[20)
2023
2022
US$
US$
611,521
859,666
611,521
859,666
(1,726,339)
{3,260,875)
(1,114,818)
(2,401,209)
5,084,623
3,680,578
{651,253)
{709,482)
{16,180,007)
(5,084,623)
(24,324,057)
{20,199)
(1,766,071)
{39,954,376)
6,980,112
{907,764)
5,214,041
(40,862,140)
5,214,041
(40,862,140)
5,214,041
(40,862,140)
PetroNeft Resources pie
Company Statement of Financial Position
As at 31 December 2023
Non-current Assets
Property, plant, and equipment
• Financial assets - investments in joint ventures and
subsidiaries
Financial assets - loans
Current Assets
Trade and other receivables
Cash and cash equivalents
Assets associated with assets held for sale
Total Assets
Equity and Liabilities
Capital and Reserves
Called up share capital
Share premium account
Share-based payment reserve
Retained loss
Other reserves
Equity attributable to equity holders of the parent
Non-current Liabilities
Interest bearing loans and borrowings
Derivative financial liabilities
Deferred tax liability
Current Liabilities
Interest-bearing loans and borrowings
Derivative financial liabilities
Trade and other payables
Total Liabilities
Total Equity and Liabilities
Note
11
12
13
14
15
16
17
18
18
10
18
18
19
2023
US$
32,275
8,420
40,695
1,396,550
1,437,245
1,437,245
13,661,466
147,679,056
6,796,540
(175,416,019)
511,981
{6,766,976)
5,940,602
2,263,619
8,204,221
8,204,221
1,437,245
2022
US$
94,483
66,240
160,723
1,707,896
1,868,619
1,868,619
13,661,466
147,679,056
6,796,540
(180,630,060)
511,981
{11,981,017)
1,004,787
6,980,112
7,984,899
3,971,394
313,168
1,580,175
5,864,737
13,849,636
1,868,619
The Company reported a profit for the financial year ended 31 December 2023 of US$5.214 million (2022: loss of
US$40.86 million).
Approved by the Board on
16 December 2024.
David Sturt
Director
Director
[21]
PetroNeft Resources plc
[22]
Company Statement of Changes in Equity
For the year ended 31 December 2023
Share
capital
Share
premium
Share-based
payment and
other reserves
Retained loss
Total
US$
US$
US$
US$
US$
At 1 January 2022
13,661,466
147,679,056
7,308,521
(139,767,920)
28,881,123
Profit/(Loss) for the year
-
-
-
(40,862,140)
(40,862,140)
Total comprehensive loss for the year
-
-
-
(40,862,140)
(40,862,140)
At 31 December 2022
13,661,466
147,679,056
7,308,521
(180,630,060)
(11,981,017)
At 1 January 2023
13,661,466
147,679,056
7,308,521
(180,630,060)
(11,981,017)
Profit for the year
-
-
-
5,214,041
5,214,041
Total comprehensive profit for the year
-
-
-
5,214,041
5,214,041
At 31 December 2023
13,661,466
147,679,056
7,308,521
(175,416,019)
(6,766,976)
Share premium is the amount received for shares issued in excess of their nominal value, net of share issuance costs.
Retained loss is the cumulative losses recognised in the Statement of Comprehensive Income
PetroNeft Resources plc
[23]
Company Cash Flow Statement
For the year ended 31 December 2023
2023
2022
Operating Activities
Note
US$
US$
Profit /(Loss) before taxation
(1,766,071)
(39,954,376)
Adjustments to reconcile loss before tax to net cash flows
Non-cash
Impairment of financial assets- investments in joint
ventures and subsidiaries/Assets held for Sale
-
16,180,007
Impairment of financial assets-Loans Receivable
13
5,084,623
24,324,057
Foreign Exchange Losses/(Gains)
7
311,346
(425)
Loss Allowance
-
1,314,016
Loss/(Profit) on equity settlement of financial liabilities
-
1,753,874
Finance income
8
(5,084,623)
(3,680,578)
Finance costs
9
651,253
749,880
Fair value gains on financial derivatives
-
(20,199)
Working capital adjustments
Decrease/(Increase) in trade and other receivables
14
62,208
(317,185)
Increase / (Decrease) in trade and other payables
19
683,444
1,009,208
Net cash flows used in operating activities
(57,820)
(395,595)
Investing activities
Loan facilities advances
-
-
Return of loan facilities
-
-
Net cash (used in)/received from investing activities
-
-
Financing activities
Repayment of interest on loan facilities
-
(248,055)
Repayment of principal on loan facilities
-
-
Net cash received from financing activities
-
(248,055)
Net decrease in cash and cash equivalents
(57,820)
(643,650)
Translation adjustment
-
1
Cash and cash equivalents at the beginning of the
year
15
66,240
709,889
Cash and cash equivalents at the end of the year
15
8,420
66,240
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[24]
Notes to the Financial Statements
For the year ended 31 December 2023
1.
General information on the Company and the Group
PetroNeft Resources plc (“PetroNeft”, “the Company”, or together with its subsidiaries and joint venture, “the Group”) is a
public limited Company incorporated in the Republic of Ireland with the company registration number 408101. The Company
listing on the Alternative Investments Market (“AIM”) of the London Stock Exchange and the Enterprise Securities Market
(“ESM”) of Euronext was cancelled as of 4 January 2024. The address of the registered office and the business address in
Ireland is 20 Holles Street, Dublin 2. The Company is domiciled in the Republic of Ireland.
The principal activities of the Group, which are unchanged from last year, are oil and gas exploration, development, and
production.
2.
Going Concern
On the 11 July 2024, with final remittance to PetroNeft, the sale of its primary producing asset Lineynoye LLC was completed.
Subject to final compliance matters, the parent of Lineynoye LLC, the Dutch registered Russian BD Holdings B.V., will file for
voluntary wind up during Q4 2024.
Previously the Company announced, that on 10 May 2023, Stimul T LLC, the operator of Licence 61 voluntary filed for
bankruptcy administration, as on 29 August 2022, there was a unilateral suspension of oil transhipments by Nord Imperial
LLC. Both Nord Imperial LLC and Stimul T LLC had been engaged in a legal dispute over the transhipment tariff rates dating
back to 2015. Disappointingly, Stimul T failed in the first instance to secure legal redress against Nord Imperial LLC, and there
were no preliminary adverse Anti-Monopoly findings against Nord Imperial LLC.
On the 1 August 2023, PetroNeft announced it had agreed Heads of Terms for the sale of its equity interest in WorldAce
Investment Limited for US$1 to Pavel Tetyakov, current chief executive officer of PetroNeft. On the 2 August 2024,
PetroNeft’s equity in the Cypriot joint Venture, WorldAce Investment Limited and parent of Stimul T LLC was transferred to
Pavel Tetyakov.
As reported on Note 18, the Company achieved revised full and final debt settlement terms, for all its loan finance
agreements. The main settlement terms include the following.
•
For payments equating to 10% of unsecured Loan principal amounts, there would be cancellation of all accrued
interest plus the remaining 90% Loan principal.
•
For payment equating to 30% of Petrogrand’s AB secured Loan principal and the right but not the obligation to
acquire a further 65 million Ordinary Shares in PetroNeft, there would be cancellation of all accrued interest plus
the remaining 70% Loan principal.
•
Petrogrand AB, was the only third-party entity holding security over all the assets and future revenue streams of
PetroNeft. It is a related party, given Maxim Korobov, a former director and ultimate beneficial owner of Natlata
Partners Limited which own 25.7% of PetroNeft. Maxim Korobov also owns more than 50% interest in Petrogrand
AB. On payment of the final settlement amounts, all and any securities accruing to Petrogrand AB are cancelled.
The Company has analysed its cash flow requirements through to 30 November 2025. The cash flows are dependent on a)
proactive management of trade creditors and other accruals, including the agreed deferral of directors and senior
management fees, b) discharge of debt holders liabilities in line with revised full and final settlement terms and c) no
adverse claims or events that potentially erodes any cash holding attributable to the Company as it progresses to a route of
a successful wind down either through a liquidation or keep the Company in existence as a non-trading entity.
The Company will need additional funding to continue as a going concern, where:
•
PetroNeft identifies other business opportunities.
•
Business costs, in particular compliance and statutory reporting fees are higher than expected.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[25]
2.
Going Concern (continued)
With respect to the ongoing conflict between Russia and Ukraine, PetroNeft continues to operate within the laws of the
countries in which it has operations. PetroNeft and its management look forward to a swift resolution to the ongoing conflict.
At this time, it is not possible to determine when such a resolution will be achieved.
The above circumstances represent material uncertainties that cast significant doubt upon the Company’s ability to continue
as a going concern, more so in light of the disposal of its Russian assets. After making enquiries, and considering the
uncertainties described above, the Directors are confident that the Group and the Company will have adequate resources
to continue in operational existence for the foreseeable future to bring the Company to a position of a wind down. The
judgement is supported by:
•
Near term cash injection following the disposal of PetroNeft’s Russian assets.
For these reasons, the basis in preparing the annual report and accounts is other than that of Going Concern.
Accordingly, these financial statements do include adjustments to the carrying amount or classification of assets and
liabilities that would result if the Company were unable to continue as a going concern.
3.
Accounting policies
3.1
Basis of Preparation
The financial statements have been prepared on a historical cost basis. The financial statements are presented in US Dollars
(’US$’).
The Company’s accounting policies set out below have been applied consistently, for all periods in the preparation of these
financial statements.
Statement of Compliance
The standalone financial statements of PetroNeft Resources plc have been prepared in accordance with International
Financial Reporting Standards (” IFRS”) as adopted by the European Union (“EU”).
3.2
Significant Accounting Judgements, Estimates and Assumptions
The preparation of these standalone financial statements is following IFRS as adopted by the European Union. The (“EU”)
requires management to make judgements, estimates and assumptions that affect the reported amounts attributable to
the assets and liabilities at the end of the reporting year and the amounts of revenues and expenses recognised during the
reporting period. Estimates and judgements are continuously evaluated and are based on management’s experience and
other factors, including expectations of the future events that are believed to be reasonable under the circumstances.
However, uncertainty about these assumptions and estimates could result in outcomes that require an adjustment to the
carrying amount of the asset or liability affected in future periods.
(a) Judgements
In the process of applying the Company’s accounting policies, management has made the following judgements, apart from
those involving estimations, which have a significant effect on amounts recognised in the standalone financial statements.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[26]
3.2
Significant Accounting Judgements, Estimates and Assumptions (continued)
Going concern – Note 2
The Directors have at the time of approving the financial statements, no reasonable expectation that the Company has
adequate resources to continue in operational existence for the near future. The basis for this judgement is the limited
cashflow post the disposal of the Company’s Russian Assets, the lack of any viable expressions of interests in the
The location of PetroNeft’s business operations in Russia, created an environment which precluded its ability to be able to
raise fund. Despite proactive management of trade payables and loan balances and noting upcoming compliance fees, the
business will not have the financial broadband to pursue other new business ventures.
For these reasons, the Directors report, the basis in preparing the annual report and accounts is other than that of Going
Concern. Further detail is contained in Note 2 above.
Financial assets at amortised cost. – Notes 12,13,14 and 164.
For 2023, the share of losses and currency translation adjustments in the WorldAce Investment Limited joint venture
exceeded the carrying value of equity-accounted investment in the joint venture. Historically it, was judged that the financial
assets from the joint ventures are long term interests that, in substance, form part of the entity’s net investment in the joint
ventures, and post application of IFRS 9 to long term interest, under IAS 28, any excess loss should be credited against the
carrying value of the financial assets from the joint venture Company in accordance with IAS 28.
Business model assessment
Classification and measurement of financial assets depends on the results of the Solely Payments of Principal and Interest
(SPPI) and the business model test. The Company determines the business model at a level that reflects how group of
financial assets are managed together to achieve a business objective. This business model assessment moves from
estimates to judgements reflecting all relevant evidence including how the performance of the assets is evaluated and their
performance measured, the risks that affect the performance of the assets and how these are managed and how the
managers of the assets are compensated. The Company monitors financial assets measured at amortised cost or fair value
through other comprehensive income that are derecognised prior to their maturity to understand the reason for their
disposal and whether the reasons are consistent with the objective of the business model for which the asset was held.
Monitoring is part of the Company’s continuous assessment of whether the business model for which the remaining financial
assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model
and so a prospective change to the classification of those assets. No such changes were required during the periods
presented.
(b) Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that
have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next
financial year are discussed below:
Impairment of property, plant, and equipment
At each balance sheet date, the Company reviews the carrying amounts of its property, plant, and equipment to determine
whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the
asset is estimated to determine the extent of any impairment loss.
The recoverable amount is determined as the higher of the fair-value-less-costs–of-disposal for the asset and the asset’s
value-in-use. If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired, and an impairment
loss is charged to the Company’s Income Statement to reduce the carrying amount in the Company’s Balance Sheet to its
recoverable amount.
Fair value is determined as the amount that would be obtained from the sale of the asset in an orderly transaction between
market participants at the measurement date. Direct costs of selling the asset are deducted.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[27]
3.2
Significant Accounting Judgements, Estimates and Assumptions (continued)
Value-in-use is determined as the present value of the estimated future cash flows expected to arise from the continued use
of the asset in its present form and its eventual disposal. Value-in-use is determined by applying assumptions specific
to the Company’s continued use and cannot consider future development. These assumptions are different to those used
in calculating fair value and consequently the value-in-use calculation is likely to give a different result to a fair value
Impairment of financial assets – Note 12,13,14 and 16
Investments in joint venture and subsidiaries in the Company balance sheet are stated at cost and are reviewed for
impairment if there are indications that the carrying value may not be recoverable in the Company balance sheet.
Income tax- Note 10
Significant judgment is required in determining the provision for income taxes. The Company recognises liabilities for
anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
3.3
Summary of Significant Accounting Policies
(a) Foreign currencies
The standalone financial statements are presented in US Dollars, which is the Company’s presentational currency. The US
Dollar is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items
included in the financial statements of each entity are measured using that functional currency. The Company’s Russian
subsidiaries’ functional currency is the Russian Rouble. Transactions in foreign currencies are initially recorded at the rate
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at.
the rate of exchange ruling at the balance sheet date. All differences are taken to the income statement except for all.
monetary items that provide an effective hedge for a net investment in a foreign operation. These are recognised in other
comprehensive income until the disposal of the net investment.
Non-monetary items are translated using the exchange rates ruling as at the date of the initial transaction.
The assets and liabilities of foreign operations are translated into US Dollars at the rate of exchange ruling at the balance
sheet date and their Income Statements are translated at monthly average exchange rates. The exchange differences arising
on the translation are taken directly to equity.
The relevant average and closing exchange rates for 2023 and 2022 were:
2023
2022
US$1 =
Closing
Average
Closing
Average
Russian Rouble
90.8171
85.1681
70.3383
61.8924
Euro
0.9049
0.9236
0.9376
0.9509
British Pound
0.7864
0.8025
0.8315
0.8112
(b)Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a
substantial period to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All
other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds. No finance costs met the criteria to be capitalised as borrowing
costs in either 2023 or 2022.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[28]
3.3
Summary of Significant Accounting Policies (continued)
(c) Property, plant, and equipment.
Property, plant and equipment are stated at cost, less accumulated depreciation, and accumulated impairment losses, if
any.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of the decommissioning obligation, and for qualifying assets, relevant borrowing.
costs. The purchase price or construction cost is the aggregate amount paid, and the fair value of any other consideration
given to acquire the asset.
Depreciation
Property, plant, and equipment are generally depreciated on a straight-line basis over their estimated useful lives at the
following annual rates:
•
Plant and machinery – 10% to 35%.
•
Motor vehicles – 14% to 35%.
•
Property, plant, and equipment – 10 % -15%
(d) Intangible Assets
Intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The carrying
values are reviewed for indicators of impairment at each reporting date and are subject to impairment testing when events
or changes in circumstances indicate that the carrying values may not be recoverable.
Intangible assets are amortised on a straight-line basis. In general, based on the current composition of definite-lived
intangible assets which represents extraction rights, the useful lives are 35 years. Amortisation periods, useful lives, expected
patterns of production and residual values are reviewed at each financial year-end. Changes in the expected useful life or
the expected pattern of production of future economic benefits embodied in the asset are accounted for by changing the
amortisation period or method as appropriate on a prospective basis.
(e) Financial assets
Financial assets – Classification
From 1 January 2018, the Company classifies its financial assets in the following measurement categories:
• those to be measured at amortised cost, and
• those to be measured subsequently at fair value (either through OCI or through profit or loss).
The classification and subsequent measurement of debt financial assets depends on: (I) the Company’s business model for
managing the related assets portfolio and (ii) the cash flow characteristics of the asset.
For investments in equity instruments that are not held for trading, classification will depend on whether the Company has
made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through
other comprehensive income (FVOCI). This election is made on an investment-by-investment basis.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity
instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the
time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
Financial assets - Recognition and derecognition
Purchases of financial assets are recognized when the entity becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been
transferred and the Group has transferred all the risks and rewards of ownership.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[29]
3.3
Summary of Significant Accounting Policies (continued)
Financial assets - Measurement
At initial recognition, a financial asset is measured at its fair value plus, in the case of a financial asset not at fair value through
profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at FVTPL are expensed in profit or loss. Fair value at initial recognition is best evidenced by
the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and
transaction price which can be evidenced by other observable current market transactions in the same instrument or by a
valuation technique whose inputs include only data from observable markets.
Financial assets - impairment - credit loss allowance for ECL
From 1 January 2018, the Company assesses on a forward-looking basis the expected credit losses “ECL” for debt instruments
(including loans) measured at Amortised Cost and FVOCI and with the exposure arising from loan commitments and financial
guarantee contracts. The Company measures ECL and recognises credit loss allowance at each reporting date. The
measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of
outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost
and effort at the end of each reporting period about past events, current conditions, and forecasts of future conditions.
The carrying amount of the financial assets is reduced using an allowance account, and the amount of the loss is disclosed
separately in the statement of profit or loss within the Impairment of Financial Assets Loans and Receivables
Debt instruments measured at Amortised Cost are presented in the statement of financial position net of the allowance for
ECL.
Expected losses are recognized and measured according to one of two approaches: general approach or simplified approach.
For trade receivables the Company applies the simplified approach permitted by IFRS 9, which uses lifetime expected losses
to be recognised from initial recognition of the financial assets.
For all other financial asset that are subject to impairment under IFRS 9, the Company applies general approach three stage
model for impairment. The Company applies a three-stage model for impairment, based on changes in credit quality since
initial recognition. A financial instrument that is not credit impaired on initial recognition is classified in Stage 1.
Financial assets - write off.
Financial assets are written off, in whole or in part, when the Company exhausted all practical recovery efforts and has
concluded that there is no reasonable expectation of recovery. The write off represents a derecognition event. The
Company may write off financial assets that are still subject to enforcement activity when the Company seeks to recover
amounts that are contractually due, however, there is no reasonable expectation of recovery.
Cash and cash equivalents.
Cash and cash equivalents comprise cash on hand and demand deposits. Cash and cash equivalents are carried at amortised
cost.
Financial assets at amortised cost
These are held with the objective to collect their contractual cash flows, and their cash flows represent solely payments of
principal and interest. Accordingly, these are measured at amortised cost using the effective interest method, less.
provision for impairment. Financial assets at amortised cost are classified as current assets if they are due within one year
or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets.
Trade receivables and other receivables are classified as trade and other receivables. Financial assets are measured at
amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[30]
3.3
Summary of Significant Accounting Policies (continued)
effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Loans to and
receivables from joint ventures represent funding by the Company for which repayment is neither planned nor likely to
occur in the foreseeable future. These are treated as part of the Company’s net investment in the joint ventures.
Financial liabilities
Financial liabilities - measurement categories
Financial liabilities are initially recognised at fair value and classified as subsequently measured at amortised cost, except for
(i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short
positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial
liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments.
Financial Liabilities-Fair value through profit or loss
This category comprises out-of-the-money derivatives where the time value does not offset the negative intrinsic value.
They are carried in the Company statement of financial position at fair value with changes in fair value recognised in the
Company’s statement of comprehensive income. The Company does not hold or issue derivative instruments for speculative
purposes, but for hedging purposes. Other than these derivative financial instruments, the Company does not have any
liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss.
Derivative Financial Instruments
Derivative financial instruments are contracts, the fair value of which is derived from one or more underlying financial
instruments or indices, and include futures, forwards, swaps and options in the interest rate, foreign exchange, equity, and
credit markets.
Derivative financial instruments are recognised in the statement of financial position at fair value. Fair values are derived
from prevailing market prices, discounted cash flows or option pricing models as appropriate.
In the statement of financial position,
•
derivative financial instruments with positive fair values (unrealised gains) are included as assets and
derivative financial instruments.
•
with negative fair values (unrealised losses) are included as liabilities.
The changes in the fair values of derivative financial instruments are recognised through profit and loss.
(f) Trade payables
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective
interest rate method.
(g) Non-current liabilities
Non-current liabilities represent amounts that are due more than twelve months from the reporting date.
(h) Interest-bearing loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest rate method. Gains and losses are recognised in the Income Statement when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by considering any discount or premium on acquisition and fee or costs that are an integral part
of the EIR. The EIR amortisation is included in finance cost in the Income Statement.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[31]
3.3
Summary of Significant Accounting Policies (continued)
(i) Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms. of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the
Income Statement. Substantially modified means when the net present value of the cashflows under the original terms and
the modified terms is greater than 10%.
(j) Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
(k) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:
•
In the principal market for the asset or liability, or
•
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing
the asset or liability, if market participants act in their economic best interest.
A fair value measurement of a non-financial asset considers a market participant's ability to generate economic benefits by
using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest
and best use.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which
inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value
are observable, either directly or indirectly.
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are
not based on observable market data.
(l) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing each.
product to its present location and condition.
Net realisable value represents the estimated selling price in the normal course of business less estimated costs of
completion and estimated costs necessary to make the sale.
(m) Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) because of a past event, and it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the Company expects some or all a provision to be reimbursed,
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[32]
3.3
Summary of Significant Accounting Policies (continued)
for example, under an insurance contract, the reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the Company Income Statement
net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current
pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognised as a finance cost.
A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events or where the
amount of the obligation cannot be measured with reasonable reliability. Contingent assets are not recognised but are
disclosed where an inflow of economic benefits is probable.
(n) Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are
subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an
effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying
amount on initial recognition.
(o) Share capital
Ordinary shares are classified as equity. Costs of share issues are deducted from equity.
(p) Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that
are enacted or substantively enacted, by the reporting date, in the countries where the Group operates and generates
taxable income.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences, except:
▪ in respect of taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint
ventures, where the timing of the reversal of the temporary differences can be controlled, and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, including carry forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised except:
▪ in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against which the temporary
differences can be utilised.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[33]
3.3
Summary of Significant Accounting Policies (continued)
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be
utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the balance sheet date.
Deferred income tax relating to items recognised outside of profit and loss is recognised outside profit and loss. Deferred
tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in
equity.
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set off current
tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same
taxation authority.
(q) Revenue recognition
Revenue is recognised when control has been transferred to the customer. Revenue is recognized at the transaction price
which the Company expects to be entitled to, after deducting sales taxes, excise duties and similar levies. For contracts that
contain separate performance obligations the transaction price is allocated to those separate performance obligations by
reference to their relative standalone selling prices.
The Company recognises revenue from the following major sources:
▪
Management services
Revenue from management services is recognised in accordance with agreements with our subsidiaries and joint venture
partner. The provision of management services is recognised monthly at a variable price with an application of “right to
invoice” practical expedient.
(r) Share-based payment
Employees (including senior executives) and Directors of the Company may receive fees and remuneration in the form of
share-based payment transactions, whereby employees render services as consideration for equity instruments (“equity-
settled transactions”).
In situations where equity instruments are issued and some or all the goods or services received by the entity as
consideration cannot be specifically identified, the unidentified goods or services received (or to be received) are measured
as the difference between the fair value of the share-based payment transaction and the fair value of any identifiable goods
or services received at the grant date. This is then capitalised or expensed as appropriate.
(s) Equity-settled transactions
The cost of equity-settled transactions is measured by reference to the fair value at the date on which they are granted. The
fair value is determined by an external valuer using an appropriate pricing model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in
which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and
the Company’s best estimate of the number of equity instruments that will ultimately vest.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[34]
3.3
Summary of Significant Accounting Policies (continued)
The income statement charges or credit for a period represents the movement in cumulative expense recognised as at the
beginning and end of that period and is recognised in employee benefits expense.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is
conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether the market or non-
vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled transaction are modified, the minimum expense recognised is the expense as if the
terms had not been modified if the original terms of the awards are met. An additional expense is recognised for any
modification that increases the total fair value of the share-based payment transaction or is otherwise beneficial to the
employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not
yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within
the control of either the entity or the employee is not met. However, if a new award is substituted for the cancelled award
and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they
were a modification of the original award, as described in the previous paragraph.
Where appropriate, the dilutive effect of outstanding options is reflected as additional share dilution in the computation of
diluted earnings per share.
(t) Leases
The Company accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a
period in exchange for consideration. Leases are those contracts that satisfy the following criteria: (a) There is an identified
asset; (b) The Company obtains substantially all the economic benefits from use of the asset; and (c) The Company
has the right to direct use of the asset. The Company considers whether the supplier has substantive substitution rights. If
the supplier does have those rights, the contract is not identified as giving rise to a lease. In determining whether the
Company obtains substantially all the economic benefits from use of the asset, the Company considers only the economic
benefits that arise from use of the asset, not those incidentals to legal ownership or other potential benefits. In determining
whether the Company has the right to direct use of the asset, the Company considers whether it directs how and for what
purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are
pre-determined due to the nature of the asset, the Company considers whether it was involved in the design of the asset in
a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or
portion of a contract does not satisfy these criteria, the Company applies other applicable IFRSs rather than IFRS 16.
(u) Finance Income and finance cost
For all financial instruments measured at amortised cost, interest income or expense is recorded using the effective interest
rate, which is the rate that exactly discounts the estimated future cash payments or receipts through the expected.
life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or
liability. Interest income is included in Finance Income in the income statement. Interest expense is included in the Finance
cost in the income statement.
(v) Employee Costs
Liabilities for wages and salaries, including non-monetary benefits are measured at the amount expected to be paid when
the liability is settled. The liability for annual leave is recognised in current provisions in respect of employees' services up
to the reporting date and is measured at the amount expected to be paid when the liability is settled. Regardless of the
expected timing of settlements, provisions made in respect of employee benefits are classified as a current liability, unless
there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date, in which
case it would be classified as a non-current liability.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[35]
3.3
Summary of Significant Accounting Policies (continued)
Pension benefits are funded over the employees’ period of service by way of contributions to a defined contribution
scheme. Contributions are charged to the Company’s Income Statement in the year to which they relate.
(w) Convertible debt
The proceeds received on issue of the Company’s convertible debt are allocated into their liability and equity components.
The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that
would be payable on a similar debt instrument that does not include an option to convert. Subsequently, the debt
component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or maturity
of the bond. The remainder of the proceeds is allocated to the conversion option and is recognised in the "Convertible debt
option reserve" within shareholders' equity, net of income tax effects.
(x) Joint Arrangements
Joint arrangements the Company is a party to a joint arrangement when there is a contractual arrangement that confers
joint control over the relevant activities of the arrangement to the Company and at least one other party. Joint control is
assessed under the same principles as control over subsidiaries. The Company classifies its interests in joint arrangements
as either: - Joint ventures: where the Company has rights to only the net assets of the joint arrangement - Joint operations:
where the Company has both the rights to assets and obligations for the liabilities of the joint arrangement. In assessing the
classification of interests in joint arrangements, the Company considers: - The structure of the joint arrangement - The legal
form of joint arrangements structured through a separate vehicle - The contractual terms of the joint arrangement
agreement - Any other facts and circumstances (including any other contractual arrangements). The Company accounts for
its interests in joint ventures in the same manner as investments in Associates (i.e., using the equity method). Any premium
paid for an investment in a joint venture above the fair value of the Company’s share of the identifiable assets, liabilities and
contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where
there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment
is tested for impairment in the same way as other non-financial assets.
3.4
Changes in Accounting Policy and Disclosures – Adoption of new or revised standards and interpretations
There have been no new standards or amendments to standards adopted by the Company during the year ended 31 December
2023, which have had a material impact on the Company.
4.
Segment information
The Company’s reporting segments are shown below. They include segment information on allocation of assets and
segment information on revenues by both location and customer.
The risk and returns of the Company’s operations are primarily determined by the nature of the activities that the Company
engages in, plus given the adoption of international sanctions in the wake of the Russian invasion of Ukraine, the
geographical location of these operations. This is reflected by the Company’s organisational structure and the Company’s
internal financial reporting systems.
Management monitors and evaluates the operating results for the purpose of making decisions consistently with how it
determines operating profit or loss in the Company’s financial statements.
Geographical segments
Substantially all the Group’s sales and capital expenditures would have been allocated in Russia.
Assets are allocated based on where the assets are located:
2023
2022
Non-current assets
US$
US$
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[36]
Russia
-
-
Ireland
-
-
-
-
Revenues are allocated on where the underlying business
and assets are located.
2023
2022
US$
US$
Revenue- Location
Russia
611,521
859,666
611,521
859,666
2023
2022
US$
US$
Revenue- Customer
WorldAce Investment Limited
399,760
655,660
Russian BD Holdings B.V.
211,761
204,006
611,521
859,666
5.
Revenue
2023
2022
US$
US$
Revenue
Crude Oil Sales
-
-
Management Services
611,521
859,666
Construction Services
-
-
611,521
859,666
All Crude oil revenues are recorded in Russian BD Holdings B.V., which transitioned from a joint venture to subsidiary entity
as and from 1 March 2021.
The revenue arises from sale of Crude oil to third party offtakers, based in the Russian federation
The Holding Company fee income, being management service fees reimbursed from expenditure that PetroNeft incurred,
as operator of the licences.
The construction revenue is mainly derived by Granite LLC, from construction services offered to Lineynoye LLC, the 100%
subsidiary of Russian BD Holding B.V. (Dutch registered) and Stimul-T LLC, which is the 100% subsidiary of joint venture
arrangement WorldAce Investments Limited (Cypriot Registered).
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[37]
6.
Employees
Number of employees
2023
2022
Company
Number
Number
The average numbers of employees (including Directors)
during the year were:
Directors
5
6
Senior Management
3
3
8
9
Employment costs (including Directors)
2023
2022
Company
US$
US$
Wages and salaries
730,298
1,286,422
Social insurance costs
23,512
81,050
Pension contributions
42,375
77,632
796,185
1,445,104
Directors' emoluments
2023
2022
Company
US$
US$
Remuneration and
other emoluments
-
Executive
Directors*
436,984
771,383
Remuneration and other emoluments - non-Executive
Directors
66,300
85,503
Pension contributions
30,000
54,883
533,284
911,769
* Includes termination fees on retirement of PetroNeft’s Chief Executive officer of US$Nil (2022:US$188,628), and Medical
Insurance of US$3,392 (2022: US$13,171).
(a) Included in the above are unpaid fees and remuneration due to Directors as at 31 December 2023 of US$1,325,100 (2022:
US$817,943)
(b) Pension contributions to directors during the year relate to 1 director (2022: 2 Directors).
(c) An amount of US$233,492 (2022: US$407,778) relating to Executive Directors’ salaries was re-charged to WorldAce
Investments Limited.
(d) An amount of US$70,048 (2022: US$122,333) relating to Executive Directors’ salaries was re-charged to Russian BD Holdings
B.V.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[38]
7.
Operating loss
Note
2023
2022
Operating loss is stated after charging/(crediting):
US$
US$
Included in cost of sales
Short term lease rentals - equipment
-
-
Included in administrative expenses
Foreign exchange (gains)/losses-trade
(7,960)
-
Foreign exchange (gains)/ losses- Assets held for sale
(311,346)
-
Depreciation of property, plant, and equipment
Included in cost of sales
-
-
Included in administrative expenses
-
-
(319,306)
-
Auditors' remuneration - Company
-audit of entity financial statements
(45,000)
45,000
-audit of group financial statements
(126,194)
126,194
(171,194)
171,194
8.
Finance income
2023
2022
US$
US$
Interest receivable -Russian BD Holdings B.V.
-
41,842
Interest receivable- WorldAce Investment Ltd.
5,084,623
3,638,736
5,084,623
3,680,578
Total interest income on financial assets
5,084,623
3,680,578
9.
Finance costs
2023
2022
US$
US$
Interest on loans
651,253
709,482
651,253
709,482
In respect of liabilities not at fair value through Profit and Loss
-
-
Total interest expense on financial liabilities
651,253
709,482
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[39]
10.
Income Tax
Company
2023
2022
US$
US$
Current income tax
Current income tax charge
-
35,210
Total current income tax
-
35,210
Deferred tax
Relating to the origination and reversal of temporary differences
(6,980,112)
872,554
Total deferred tax
(6,980,112)
907,764
Income tax expense reported in the Company Income Statement
(6,980,112)
907,764
2023
2022
US$
US$
Loss before income tax
(1,766,071)
(39,954,376)
Accounting loss multiplied by Irish standard rate of tax of 12.5%
(220,759)
(4,994,297)
Non-deductible expenses
38,918
4,605,461
Effect of higher tax rates on investment income
635,578
449,970
Tax deductible timing differences
(6,980,112)
907,764
Other
(453,737)
(61,134)
Taxable losses not utilised
-
-
Total tax expense reported in the Company Income Statement
6,980,112
907,764
Deferred tax
Company
2023
2022
US$
US$
Deferred income tax liability
At 1 January
6,980,112
6,072,348
Expense for the year recognised in the income statement
1,271,155
872,554
Reversal deferred tax accruals
(8,251,267)
-
Profit and Loss charge /(gain) for Deferred tax
(6,980,112)
872,554
Translation adjustment
-
(6,511)
At 31 December
-
6,980,112
Deferred tax at 31 December relates to the following:
2023
2022
US$
US$
Deferred income tax liability
Accrued interest income on intra-Group loans
-
6,980,112
-
6,980,112
The Company has the following unutilised tax losses US$7,719,399 (2022:US$ 6,598,206). There is no
certainty that the Company will generate future tax profits that will be available for offset against the
unutilised tax losses.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[40]
Factors that may affect future tax charges:
The tax charge in future years will be affected by changes to the rates of Irish Corporation Tax. There is no current
expectation that the tax rate of 12.5% in Ireland will change in the foreseeable future.
11.
Property, Plant and Equipment
Property
Company
Plant and
machinery
US$
Cost
At 1 January 2022
32,066
At 1 January 2023
32,066
At 31 December 2023
32,066
Depreciation
At 1 January 2022
32,066
Charge for the year
-
At 1 January 2023
32,066
Charge for the period
-
At 31 December 2023
32,066
Net book values
At 31 December 2023
-
At 31 December 2023
-
12.
Investment in Joint Venture and Subsidiaries
Company
Investment
in joint
ventures
Investment
in
Subsidiaries
Total
US$
US$
US$
Cost
At 1 January 2022
-
8,730,848
8,730,848
Investment in Russian BD Holding B.V.*
9,157,055
9,157,055
Impairment of financial assets**
(16,180,007)
(16,180,007)
Reclassified to current assets held for sale
-
(1,707,896)
(1,707,896)
At 1 January 2023
-
-
-
Investment in Russian BD Holdings B.V.
-
-
-
Impairment of financial assets
-
-
-
Reclassified to current assets held for sale
-
-
-
At 31 December 2023
-
-
-
Net book values
At 31 December 2023
-
-
-
At 31 December 2022
-
-
-
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[41]
12.
Investment in Joint Venture and Subsidiaries (continued)
*The increase in Investment in Russian BD Holdings B.V., arose as to the transfer of loans receivable by PetroNeft in the
sum of US$8,593,199 and receivables from recharge of recoverable CSMA costs of US$563,856, totalling US$9,157,055.
** The investment in the subsidiary net of amount reclassified to current assets held for sale is subsequently impaired at
100% level.
Details of the Company's holding in direct and indirect subsidiaries at 31st December 2023 are as follows:
Name of subsidiary
Registered office
Proportion of
ownership
interest
Proportion of
voting power
held
Principal activity
Granite Construction LLC
13 Sovpartshkolny
Lane, Office 210,
Tomsk 634009, Russia
100%
100%
Construction
Dolomite LLC
13 Sovpartshkolny
Lane, Office 210,
Tomsk 634009, Russia
100%
100%
Oil and gas exploration
Russian BD Holdings B.V.
Prins Bernhardplein
200, 1097 JB,
Amsterdam, the
Netherlands
90%
90%
Holding Company
Lineynoye LLC
13 Sovpartshkolny
Lane, Office 210,
Tomsk 634009, Russia
90%
90%
Oil and gas exploration
Details of the Group's interest in joint ventures at 31st December 2023 are as follows:
Name of entity
Registered office
Proportion of
ownership
interest
Proportion of
voting power
held
Principal activity
WorldAce Investments
Limited*
3 Themistocles Street,
Nicosia, Cyprus
50%
50%
Holding Company
Stimul-T LLC
13 Sovpartshkolny
Lane, Office 210,
Tomsk 634009, Russia
50%
50%
Oil and gas exploration
*Oil India International B.V. owns the other 50% of WorldAce Investments Limited.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[42]
13.
Financial assets - loans and receivables
Company
2023
2022
US$
US$
Loans to WorldAce Investments Limited
77,559,881
72,475,258
Loss Allowance
(3,109,501)
(3,109,501)
Less: share of WorldAce Investments Limited loss
(45,041,703)
(45,041,703)
Less: Impairment Provision
(29,408,680)
(24,324,057)
-
-
Loans to Russian BD Holdings B.V.
-
8,593,199
Less Transfer to Investments in Subsidiaries
-
(8,593,199)
-
-
Total Company Loans to Joint Venture and Subsidiary
-
-
The Company has granted a loan facility to its joint venture undertaking WorldAce Investments Limited of up to US$45
million. This loan facility is US$ denominated and unsecured. Interest currently accrues on the loan at USD LIBOR plus 6.0%.
The loan was set to mature on 31 December 2025. As at 31 December 2022 the loan was fully drawn down. The realisation
of the financial assets in respect of WorldAce was dependent on the continued successful development of economic reserves
which is subject to several uncertainties including the ability to raise finance, future rates of oil production and future
international oil prices to continue to successfully generate revenue from the assets or the monetisation of the asset through
a sale or farmout. The asset has been shut in due to the non-transhipment of oil on the Nord Imperial LLC pipeline. This
occurred as a commercial and legal dispute arose between Stimul T LLC and Nord Imperial LLC as to tariff rates applicable
which increasingly made the production of oil on L61 non-commercial. Post a protracted legal dispute, Stimul T LLC lost in
the first instance and on 10 May 2023 Stimul T filed for voluntary bankruptcy. On 12 October 2023 at the Extraordinary
General Meeting of PetroNeft, the shareholders voted by 88% for and 12 % against, to accept an offer of 1$(one dollar) for
PetroNeft’s equity interest in WorldAce Investment Limited from Pavel Tetyakov. Accordingly, any sums outstanding on loan
facilities are considered fully impaired.
For FY 2023, the interest on the WorldAce loans in the sum of US$5,084,623 has been fully impaired.
In March 2021, the Company increased its equity holding in Licence 67 from 50% to 90%. The shareholders of Russian BD
Holdings B.V. (RBD) passed a resolution, effective as of 9 February 2022, to convert all loan balances and payables owing to
them, at that time into the share premium account as part of equity of Russian BD Holdings B.V. This increased the value of
the Investment in Subsidiaries at PetroNeft Company level. As no financial assets loan facilities, at Company level,
attributable to Russian BD Holdings B.V., were outstanding as of 31 December 2023 or 31 December 2022 no impairment
provision was recorded against the loans outstanding at the respective reporting date.
14.
Trade and other receivables
Company
2023
2022
US$
US$
VAT Receivable
25,388
69,329
Prepayments
6,887
25,154
32,275
94,483
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[43]
15.
Cash and Cash Equivalents
Company
2023
2022
US$
US$
Cash at bank
8,420
66,240
8,420
66,240
Bank deposits earn interest at floating rates based on daily deposit rates. Short-term deposits when practicable, are made
for varying periods of between one day and one month depending on the immediate cash requirements of the Company
and earn interest at the respective short-term deposit rates.
16.
Assets associated with Assets held for sale
Group & Company
US$
Oil and gas properties
5,343,036
Property plant and Equipment
108,384
Exploration and evaluation assets
9,826,019
Assets under construction
1,959,644
Intangible Assets
3,827,838
Inventories
102,438
Trade and other receivables
85,380
21,252,739
Impairment of Assets held for Sale
(17,446,534)
Assets Held for Sale
3,806,205
Provisions
283,958
Trade and other payables
1,595,591
Liabilities held for Sale
1,879,550
Assets Held for Sale -Net of Liabilities
1,926,656
Less:
Belgrave Naftogas B.V. (Minority Shareholder)
(218,760)
Assets associated with Assets held for sale 31
December 2022
1,707,896
Foreign exchange gains/ (losses)
(311.346)
Assets associated with Assets held for sale 31
December 2023
1,396,550
On 25 November 2022, the Company announced a strategic review of its business operations as it was facing increasing
challenges due to the continued Ukrainian Russian conflict and the consequent international sanctions directed at leading
Russian financial institutions and in particular, the Oil and Gas sector. The difficulties in financing the drilling of development
wells at the Cheremshanskoye field combined with the challenges in retaining professional service companies was more
evidence of these significant operational challenges. Matters were compounded by the inability to secure any resolution to
the Nord Imperial LLC tariff dispute, which ultimately led to Stimul T LLC, the owner of Licence 61 filing for bankruptcy
administration on 10 May 2023. The strategic review which included all stakeholders, would eventually lead to Heads of
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[44]
Terms agreed with Pavel Tetyakov for the sale of PetroNeft’s key assets. The disposal includes the sale of PetroNeft’s 100%
indirect shareholdings in both Lineynoye LLC, the holder of Licence 67, and Granite Construction LLC, the provider of well
maintenance services. While Stimul T LLC is in bankruptcy administration, Pavel Tetyakov has agreed to acquire PetroNeft’s
50% equity interest in the joint venture arrangement with Oil India International B.V., the Cypriot registered WorldAce
Investment Limited and parent of Stimul T LLC.
PetroNeft’s remaining Russian legal entity, Dolomite LLC, given it has remained dormant for a number of years will also seek
voluntary bankruptcy administration.
17.
Share Capital - Group and Company
2023
2021
€
€
Authorised Share Capital
1,250,000,000 Ordinary Shares of €0.01 each
12,500,000
12,500,000
12,500,000
12,500,000
Allotted, called up and fully paid equity
Number of
Ordinary Shares
Called up share
capital US$
At 1 January 2022
1,071,792,613
13,661,466
Issued during the year
-
-
At 1 January 2023
1,071,792,613
13,661,466
Issued during the year
-
-
At 31 December 2023
1,071,792,613
13,661,466
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[45]
18.
Loans and Borrowings
Company
Company
Effective
interest
rate
Contractual
maturity
date
2023
2022
%
US$
US$
Interest-bearing
Current liabilities
Petrogrand AB
10.59%
15-Mar-23
2,822,218
2,494,021
Belgrave Naftogas B.V.
8.1%
04-Mar-24
1,138,425
-
Natlata Partner Limited
10.14%
31-Mar-23
284,837
258,418
ADM Consulting
10.16%
31-Mar-23
204,374
185,519
Daria Shaftelskaya
10.13%
31-Mar-23
121,843
110,530
Michael Murphy
10.14%
31-Mar-23
25,541
23,184
David Sturt
10.14%
31-Mar-23
25,534
23,177
Natlata Partners Limited
8.1%
11-Mar-23
177,386
159,592
ADM Consulting
8.1%
11-Mar-23
177,773
160,344
David Sturt
8.1%
11-Mar-23
97,598
88,073
Karl Johnson
8.1%
11-Mar-23
192,882
65,688
Pavel Tetyakov
8.1%
11-Mar-23
38,393
34,646
Others
8.1%
11-Mar-23
633,798
367,842
5,940,602
3,971,394
Derivative financial
liabilities
8.1%
11-Mar-23
-
313,168
Total current loans
5,940,602
4,284,562
Non- Current Liabilities
Belgrave Naftogas B.V.
8.10%
04-Mar-24
-
1,004,787
Total non-current loans
-
1,004,787
Total loans and borrowings
5,940,602
5,289,349
Contractual undiscounted liability
5,940,602
5,289,349
Company
Changes in financial liabilities arising from financing
activities
2023
2022
US$
US$
At 1 January
5,289,349
4,808,147
Accrued Interest
651,253
729,681
5,940,602
5,537,828
Translation Reserve
-
(424)
At period end
5,940,602
5,289,349
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[46]
Loan facilities.
1. In 2018 the Company obtained a US$2M secured loan facility and subsequently increased by US$0.5M in 2019 from
Petrogrand AB. The security attaches to any of the assets of PetroNeft Resources plc. An asset being defined as any
present or future assets, revenues, and rights of every description. The security is for any obligation for the
repayment of monies owed to Petrogrand AB, be it present, or future, actual or contingent. Post repayment of 20%
of the revised loan balance including rolled up interest as of 31 December 2021, it was agreed the final maturity
date would be 15th December 2022, which was subsequently extended by mutual agreement to 15 March 2023. On
30 June 2023, PetroNeft announced subject to receipt of funds from the anticipated sale of PetroNeft’s Russian
assets that it had secured from Petrogrand AB, for full and final settlement, concessions of 70% on the principal
outstanding and 100% on the accrued interest. Expected cash outgoing was estimated at $0.69M, which would be
subject to revision depending on the Russian withholding tax, if any plus the then prevailing rouble/ dollar exchange
rate. In addition, it was agreed that on payment of the final agreed amount, there would be an automatic
cancellation of any and all securities held by Petrogrand AB. Given by virtue of Maxim Korobov, until 17th January
2020 a director of PetroNeft, and being a majority shareholder of Petrogrand, in excess of 50%, plus a significant
shareholder in PetroNeft controlling 25.7% of its issued equity, it is reported that Petrogrand AB is a related party.
For details of transactions between PetroNeft and Petrogrand AB, see Note 35 Related party disclosures.
2. Post conversion of the 65% loan principal attributable to the 2019 convertible loan facility, the final revised maturity
date was extended to 31 December 2022 and subsequently to the 31 March 2023. On 5 September 2023, PetroNeft
announced subject to receipt of funds from the anticipated sale of PetroNeft’s Russian assets that it had secured
from 2019 Convert Loan Holders, for full and final settlement, concessions of 90% on the principal outstanding and
100% on the accrued interest. Expected cash outgoing is estimated at $0.045M, which would be subject to revision
depending on the Russian withholding tax, if any plus the then prevailing rouble/ dollar exchange rate.
3. The consideration for the acquisition of a further 40% equity in Russian BD Holding included both the issuance of
shares in PetroNeft and a convertible loan facility of US$1.7M, with the holder of the loan retaining an option to
convert 50% of the loan amount at 0.02p stg per share. During 2021 the holder of the loan Belgrave Naftogas B.V.,
made an election to convert their full entitlement, equating to US$0.85M. The remaining balance which carried a
bank of England base rate plus 8% matures on 4 March 2024. On 5 September 2023, PetroNeft announced subject
to receipt of funds from the anticipated sale of PetroNeft’s Russian assets that it had secured from Belgrave
Naftogas B.V, for full and final settlement, concessions of 90% on the principal outstanding and 100% on the
accrued interest. Expected cash outgoing was estimated at $0.085M, which would be subject to revision
depending on the Russian withholding tax, if any plus the then prevailing rouble/ dollar exchange rate.
4. During 2021 PetroNeft entered a convertible loan facility of US$2.9M with a group of thirteen lenders, seven of
which are related parties. Net cash proceeds received was US$2.245M, the balance of US$0.65M, discharged
salaries and fees owing to directors and senior managers. The convertible loan, has a final maturity date of 11 March
2023, carries an interest rate of bank of England base rate plus 8%. The holders of the convertible debt are entitled
to convert up to 75% of their loan amount into ordinary shares of PetroNeft at 0.02p stg within 1 year of signing the
loan agreement and 0.025p stg within 2 years of signing. During 2021 a total of nine lenders made an election to
convert, their full conversion amount. The principal on the Convertible loan post conversion was reduced by an
amount of US$1.85M. During 2022 and given the conversion period has elapsed the remaining 4 holders did not
exercise their rights to convert their loan receivable amounts to equity in PetroNeft. On 5 September 2023,
PetroNeft announced subject to receipt of funds from the anticipated sale of PetroNeft’s Russian assets that it had
secured from the 2021 Convertible debt holders, for full and final settlement, concessions of 90% on the principal
outstanding and 100% on the accrued interest. Expected cash outgoing is estimated at $0.103M, which would be
subject to revision depending on the Russian withholding tax, if any plus the then prevailing rouble/ dollar exchange
rate.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[47]
19.
Trade and other payables
Company
2023
2022
US$
US$
Trade payables
291,301
235,409
Director Expenses
1,865
1,086
Corporation tax
55,232
55,232
Other taxes and social welfare costs
34,506
44,305
Accruals and other payables
1,880.717
1,244,143
2,263,619
1,580,175
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
Trade and other payables are non-interest-bearing and are normally settled on 60-day terms.
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
20.
Financial risk management objectives and policies
The Company’s principal financial instruments comprise loans to its joint venture undertaking, cash and cash equivalents
and interest-bearing loans and borrowings. The main purpose of these financial instruments is to provide finance for the
Company’s operations.
The main risks arising from the Company’s financial instruments are foreign currency risk, credit risk, climate risk, liquidity
risk, interest rate risk and capital risk as augmented by the international sanctions imposed on Russia arising from the conflict
with Ukraine. The Board reviews and agrees policies for managing each of these risks which are summarised below.
Foreign currency risk
The Company undertake certain transactions denominated in foreign currencies. Hence, exposures to exchange rate
fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward exchange
contracts where appropriate.
At 31 December 2023 and 2022, the Company had no outstanding forward exchange contracts.
The Company’s principal currency exposures arise in the currencies of Russian Rouble, Euro, UK Sterling, and US Dollar. The
Company has an exposure to US Dollars because the functional currency of its Russian subsidiaries is Russian Roubles. A
change in the US Dollar/Russian Rouble exchange rate will therefore result in a foreign exchange gain or loss on the US Dollar
denominated balances in these subsidiaries. The Company has an exposure to Russian Rouble, Euro, and UK Sterling because
the Company has trade and other receivables and payables denominated in these currencies.
Foreign currency sensitivity analysis
In accordance with IFRS 7, the impact of foreign currencies is determined based on the balances of financial assets and
liabilities at 31 December 2023. The sensitivity analysis includes only outstanding foreign currency denominated monetary
items and largely results from payables and receivables and adjusts their translation at the year-end for a 5% change in
foreign currency rates.
If the US Dollar had gained/lost 5% against all currencies significant to the Company at 31 December, the impact on loss and
equity for the Company is shown below.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[48]
20.
Financial risk management objectives and policies (continued)
Company
Change
in
USD/RUB
Effect
on
profit
before
tax
Effect
on pre-
tax
equity
Change in
USD/EUR
Effect on
profit
before
tax
Effect on
pre-tax
equity
Change
in
USD/GBP
Effect on
profit
before tax
Effect on
pre-tax
equity
US$
US$
US$
US$
US$
US$
2023
5%
-123,393
-123,393
5%
-91,293
-91,293
5%
5,028
5,028
2023
-5%
136,382
136,382
-5%
-12,779
-12,779
-5%
-5,557
-5,557
2022
5%
-13,282
-13,282
5%
40,620
40,620
5%
5,890
5,890
2022
-5%
14,680
14,680
-5%
23,209
23,209
-5%
3,722
3,722
Credit risk
Credit risk arises from contractual cash flows of debt instruments carried at amortised cost, cash and cash equivalents,
deposits with banks, as well as credit exposures to customers, including outstanding receivables from joint ventures.
Climate Risk
The risks associated with climate change are subject to rapidly increasing societal, regulatory, and political focus. Embedded
climate risk into the Company’s risk framework in line with regulatory expectations and adapting the Company’s operations
and business strategy to address both the financial risks resulting from: (i) the physical risk of climate change (ii) the risk of
a transition to a low carbon economy, could have a significant impact on the Company’s operations. Physical risks from
climate change arise from several factors and relate to specific weather events and longer-term shifts in the climate. The
nature and timing of extreme weather events are uncertain, but they are increasing in frequency and their impact on the
global economy is predicted to be more acute in the future. The potential impact on economies includes, but is not limited
to, lower GDP growth, higher unemployment, and significant changes in asset prices and profitability of industries. Damage
to properties and operations of PetroNeft’s subsidiaries and joint venture could lead to increased write offs and impairment
charges in the Company’s financial statements.
As the economy transitions to a low carbon economy, Oil and Gas operations such as the Company may face significant and
rapid developments in stakeholder expectation, policy, law, and regulation which could impact activities the Company
undertakes, as well as the risks associated with its loan recoverability from its joint venture operations and impact adversely
the Group’s financial assets.
As sentiment toward climate change shifts and societal preferences change, the Company may face greater scrutiny of the
type of business it conducts, adverse media coverage and reputational damage, which may in turn impact demand for the
Company’s products, returns on certain business activities and the value of certain assets and trading positions resulting in
impairment charges. If the Company does not adequately embed risk associated with climate change into its risk framework
to appropriately, measure, manage and disclose the various financial and operational risks it faces because of climate
change, or fails to adapt its business model and business strategy to the changing regulatory requirement and market
expectations on a timely basis, it may have a material and adverse on the Company’s level of business growth,
competitiveness, profitability, capital requirements, cost of funding and financial condition.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[49]
20.
Financial risk management objectives and policies (continued)
Risk management
Credit risk is managed on a Company basis according to established policies, procedures, and controls. Credit quality is
assessed in line with credit rating criteria and credit limits are established where appropriate.
The credit risk on cash and cash equivalents is limited because the counterparties are banks with high credit ratings assigned
by international credit-rating agencies.
Management assesses the credit quality of the customer, considering its financial position, experience, and other factors.
As the Company does not have any trade receivables outstanding from third parties, this risk is minimal. Recoverability of
amounts due from joint venture companies were dependent on the success of the joint ventures.
The Company do not have any significant credit risk exposure to any single counterparty or any group of counterparties
having similar characteristics except for the loans and trade and other receivables from its joint venture WorldAce
Investment Limited and PetroNeft’s subsidiary Russian BD Holding B.V. The Company define counterparties as having similar
characteristics if they are connected entities.
(ii) Impairment of financial assets
The Company has the following types of financial assets that are subject to the expected credit loss model:
•
Trade Receivables – Qualify for the simplified model provided they are trade receivables and do not contain a significant
financing component.
•
Intra-Group Loans – General Impairment Model applies.
•
Cash and cash equivalents
Trade Receivables
Within the Company, a provision matrix has been developed to measure the expected credit loss on trade receivables. Trade
receivables are grouped by aging of receivable and by type (receivable from related parties and receivables from third
parties). This grouping is based on management judgement of the risk characteristics and is based on internal sub-groupings.
The Company has determined the historical period of 36 months prior to date at which the expected credit loss is measured
to determine historical loss data. For receivables from related parties, it has been determined that over the historical period
there has been a zero percent loss rate. Notwithstanding the fact that some of these trade receivables may go substantially
past due, these amounts are managed on a Company basis by the ultimate controlling party and as such loss had been
recorded or is expected on these amounts in normal trading environment.
However, in the current abnormal geopolitical climate and noting the significant adverse consequences of international
sanctions imposed on the Company and noting the sales terms of the disposal agreements with Pavel Tetyakov, full
impairment provision has been recognised against such loans.
Intra-Group Loans
PetroNeft has granted loans to its joint ventures and subsidiaries over the years. The largest portion of these intra-Group
loans is to WorldAce Investments Limited, bears interest at USD LIBOR plus 6.0% and have a maturity date of 31 December
2025. Further ECL of US$5,084,623 (2022:US$19,382,427), have been estimated for 2023, given the shareholders of
PetroNeft, at the Company’s Extraordinary General Meeting, held on 12 October 2023, agreed to the sale of PetroNeft’s
equity interest in WorldAce Investments Limited (W.I.L). for $1 USD (one dollar). The loan to WorldAce Investment Limited
was to be reimbursed out of the sale or farm in, to its Oil interest, Licence 61 held by Stimul -T LLC, it being a subsidiary of
WorldAce Investment Limited. Stimul-T LLC has been in bankruptcy administration since first announced by PetroNeft on 11
May 2023, given the lack of a resolution to a commercial dispute between it and Nord Imperial LLC, the transhipment
company for oil from Licence 61.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[50]
20.
Financial risk management objectives and policies (continued)
When measuring ECL the Company uses reasonable and supportable forward-looking information incorporated in the
financial model to estimate the ECL. The model encompasses multiple scenarios which outcomes are multiplied by estimated
probability factors. The ECL is the sum of probability weighted scenarios.
The forward-looking information, including macroeconomic factors (such as consumer price index, oil prices, interest rates
exchange rates, known commercial arrangements), is based on assumptions for the future movement of different economic
drivers relevant to the Company’s business and how these drivers will affect each other. The probability factors are based
on management’s estimate of the likelihood of different scenarios.
A summary of the assumptions underpinning the Company's expected credit loss model is as follows:
Category
Company definition of category
Basis for recognition of
expected credit loss
provision
Basis for calculation of
interest revenue
Performing
Counterparties have a minimal
risk of default and a strong
capacity to meet contractual cash
flows
Stage 1: 12 month
expected losses. Where the
expected lifetime of an
asset is less than 12
months, expected losses
are measured at its
expected lifetime.
Gross carrying amount
Underperforming
Counterparties for which there is
a significant increase in credit risk
as significant increase in credit
risk is presumed if interest and/or
principal repayments are 30 days
past due (see above in more
detail)
Stage 2: Lifetime expected
losses
Gross carrying amount
Non-performing
Interest and/or principal
repayments are 90 days past due
Stage 3: Lifetime expected
losses
Amortised cost carrying
amount (net of credit
allowance)
Write-off
Interest and/or principal
repayments are 180 days past
due and there is no reasonable
expectation of recovery.
Asset is written off
None
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[51]
20.
Financial risk management objectives and policies (continued)
The Company’s exposure to credit risk and the credit quality of its financial assets is presented below:
2023
Company
Internal
credit
rating
External
credit
rating
Gross
carrying
amount.
US$
ECL
US$
Accumulated
joint venture
losses.
US$
Loss
allowance
US$
Net
carrying
amount.
US$
Loans
to
subsidiary
Russian BD
Holdings
B.V.
N/A
N/A
-
-
-
-
-
Loans
to
joint
venture
WorldAce
N/A
N/A
77,559,881
(29,408,680)
(45,041,703)
(3,109,501)
-
The shareholders of Russian BD Holdings B.V. passed a resolution, effective as of 9 February 2022, to convert all loan balances
and payables owing to them, into the equity of Russian BD Holdings B.V. From a PetroNeft Company perspective the loans
owing from Russian BD Holdings, in the sum of US$8,593,199 (Note 13) was reclassified to Financial Assets Investment in
Subsidiary, which was subsequently impaired post confirmation of agreed sale by the members of PetroNeft at its
Extraordinary General Meeting on 12 October 2023 to Pavel Tetyakov, of its 100% interest in Lineynoye LLC, the holder of
Licence 67.
Cash and cash equivalents
The total amount of US$8,420 are cash held in banks. Credit losses are expected to have an immaterial effect on cash and
cash equivalents.
Liquidity risk management
Liquidity risk is the risk that the Company will encounter difficulties in meeting obligations associated with their financial
liabilities. Ultimate responsibility for liquidity risk management rests with the Board of Directors, who manage liquidity risk
and short, medium, and long-term funding and liquidity management requirements by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Cash forecasts are
regularly produced to identify the liquidity requirements of the Company. Historically the Company have relied on
shareholder funding, loan facilities and normal trade credit to finance its operations.
However given the international sanctions in operation, the Company is relying on the renegotiates with loan holders, full
and final settlement amounts, with trade creditors agreed full and final settlement amounts and with other payables on an
agreed item by item basis, as influenced by a) the expected operating costs for filing and compliance obligations in light of
prevailing reporting and statutory requirements and b)expected current and future cash holdings in light of the fact that
the only funding available to the Company to meet these future operating overhead, is that of the transaction proceeds
from disposing of the Russian assets. Such transaction proceeds, itself is subject to both adverse tax rates in Russia and
adverse currency exchange rate movements.
As at 31 December 2023, the Company have outstanding loan facilities and payables as described in Notes 18 and 19 above.
The expected maturity of the Company’s third-party financial assets (excluding prepayments) is 7 days after receipt of
proceeds from the sale of the Company’s Russian assets.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[52]
20. Financial risk management objectives and policies (continued)
The Group and the Company had no derivative financial instruments as of 31 December 2023 and 2022.
The tables below show the projected contractual undiscounted total cash outflows arising from the Company’s trade and
other payables and gross debt based on reported amounts in the Statement of Financial Position. The tables include full and
final agreed payments to third party debt holders.
Company
Within 1 year
Between 1 and
2 years
Between 2 to 5
years
After 5 years
Total
Year ended 31 December 2023
US$
US$
US$
US$
US$
Interest-bearing loans and borrowings
- current
922,838
-
-
-
922,838
Trade and other payables
473,712
-
-
-
473,712
1,396,550
-
-
-
1,396,550
Year ended 31 December 2022
Interest-bearing loans and borrowings
- current
922,838
-
-
-
922,838
Trade and other payables
785,058
-
-
-
785,058
1,707,896
-
-
-
1,707,896
Interest rate risk
The Group and Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s loans
to joint ventures which are tied to the LIBOR interest rate, and their holdings of cash and short-term deposits which are on
variable rates ranging from 0.1% to 0.5%.
Financial instrument
Fixed %
Variable %
Interest-bearing loans to joint venture-WorldAce Investments Ltd
6.0%
US$ LIBOR
It is the Group and Company’s policy, as part of its disciplined management of the budgetary process, to place surplus funds
on short-term deposit to maximise interest earned.
Capital risk management.
The Company can only manage its capital on a not for going concern basis. This conclusion is arrived at given post drafting
and confirmation of future cashflows as influenced by the expected only source of funds available to the Company, being
the transaction receipts post disposal of the Russian assets. The only rational and reasonable alternative to the Board, is to
manage the Company through a liquidated wind down or keep the Company in existence as a non-trading legal entity. The
Company manages their capital structure and adjust it considering the significant adverse changes in economic conditions.
No changes were made in the objectives, policies or processes during the years ended 31 December 2023 and 2022. The
capital structure of the Group and the Company consists of equity attributable to equity holders of the Parent, comprising
issued capital, reserves and retained losses as disclosed in the Company Statement of Changes in Equity as well as external
debt.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[53]
20.
Financial risk management objectives and policies (continued)
Fair values
The carrying amount of the Company’s financial assets and the financial liabilities is a reasonable approximation of the fair
value.
Interest rate risk
Given the sale terms for PetroNeft’s equity interest in WorldAce Investment Limited to Pavel Tetyakov, the carrying value of
the loans to WorldAce in the Company is US$Nil, which approximates to the fair value.
The carrying value of the loans to Russian BD Holdings B.V. in the Company is US$Nil million, given on 9 February 2022, both
shareholders in Russian BD Holdings B.V., elected to treat financial assets loans receivable as equity through an increase in
the share premium account of Russian BD Holdings B.V.
The fair value of the Company’s financial liabilities at the respective reporting dates in the Statement of Financial Position,
is included at the amount at which the instrument could be exchanged in a transaction between willing parties, as evidenced
by original contracts, pre renegotiated settlement amounts based on full and final settlement, expected after receipt of the
transaction proceeds, which occurred in July 2024.
Hedging
At the year ended 31 December 2023 and 2022, the Group had no outstanding contracts designated as hedges.
Offsetting of financial assets and liabilities
No financial assets and liabilities were offset in the balance sheet as of 31 December 2023 and 2022.
21.
Parent Company Accounts
Given the Board is of the opinion the basis of preparation of the Financial Statements and Annual Report of PetroNeft
Resources plc for FY 2023, is that other than that of going concern, a truer and fairer representation of the Company and its
near-term prospects are contained within such standalone financial reports.
22.
Future minimum rentals payable under short term leases at the balance sheet date are as follows:
2023
2022
US$
US$
Property, plant and equipment
Within one year
-
-
-
-
There were no capital commitments as of 31 December 2023 or 31 December 2022.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[54]
23. Related party disclosures
Transactions with subsidiaries
The Company had the following transactions with its subsidiaries during the years ended 31 December 2023 and 2022.
As and from 1 March 2021, Russian BD Holdings B.V. was consolidated as PetroNeft increased its shareholding to 90% from
50%. For information purposes only the Company activity with Russian BD Holding B.V. for fiscal 2023 and 2022 is shown
below.
Transactions with Russian BD Holdings B.V.
2023
2022
US$
US$
At 1 January
-
9,122,462
Advanced during the year
-
43,489
Transactions during the year
211,761
204,006
Interest accrued in the year
-
49,515
Payments for services made during the year
-
(14,502)
Loss Allowance
(211,761)
(289,939)
Transfer to Investment in RBD Subsidiary
-
(9,157,055)
Translation adjustment
-
42,024
At 31 December
-
-
Balance at 31 December comprised of:
Loans receivable
-
-
Trade and other receivables
-
-
-
-
Transactions with Granite construction
2023
2022
US$
US$
At 1 January
-
17,557
Loan repaid in the year
-
-
Loss Allowance
-
(45,756)
Translation adjustment
-
28,199
At 31 December
-
-
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[55]
23. Related party disclosures (continued)
Transactions with joint venture partners.
PetroNeft had the following transactions with its joint venture partners in 2023 and 2022.
Transactions with JV Partner WorldAce Investment Limited for PTR Company
2023
2022
Company
US$
US$
At 1 January
-
66,697,829
Advanced during the year
-
159,749
Transactions during the year
399,760
655,660
Interest accrued in the year
5,084,623
3,589,220
Payments for services made during the year
-
(730,181)
Loss Allowance
(399,760)
(1,006,520)
Less Share of WorldAce Investment loss
-
(49,983,330)
Less Impairment of Financial Asset
(5,084,623)
(19,382,427)
At 31 December
-
-
Balance at 31 December comprised of:
Loans receivable
77,559,881
72,475,258
Less Loss Allowance
(3,109,501)
(3,109,501)
74,450,380
69,365,757
Less Share of WorldAce Investment loss
(45,041,703)
(45,041,703)
Less Impairment of Financial Asset
(29,408,680)
(24,324,057)
-
-
Balance at 31 December comprised of:
Loans receivable
-
-
Trade and other receivables
-
-
-
-
Company remuneration of key management
Key management comprise the Directors, the Vice Presidents of Business Development and Operations of the Company, the
consulting fees paid to JLC Advisors for legal services, and Tsarina Development Limited for finance and Company secretarial
support across services provided to the holding Company.
Renumeration of key management
2023
2022
US$
US$
Compensation of key management
753,759
1,307,794
Contributions to defined contribution pension plan
42,375
77,632
At 31 December
796,134
1,385,426
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[56]
23.
Related party disclosures (continued)
The following amounts were owed by PetroNeft Company to existing key management, former management as at 31st
December 2023 and 2022
Renumeration of key management
2023
2022
US$
US$
Renumeration, fees and expenses due to Directors who were in
office during the year
1,325,100
817,943
Renumeration due to other key management
501,111
272,410
At 31 December
1,812,643
1,097,010
Transactions with Petrogrand AB
Petrogrand AB is a related party by virtue of Maxim Korobov, current beneficial owner of 25.7% equity in PetroNeft and a
former director of PetroNeft who resigned as PetroNeft’s Company Director on 17 January 2020. The loan facility is secured
by way of a floating charge on the assets of the Company and carries an interest of US$ LIBOR plus 9%. The loan facility, as
revised in quantum and cancellation of security charge held will be repaid out of the sale proceeds of Licence 67, through
the sale of Lineynoye LLC to Pavel Tetyakov.
The following is the history of this transaction in the reporting periods:
Company
Petrogrand AB
US$
Loans
At 1 January 2022
2,271,495
Interest accrued in the year
248,642
Unwinding prior year loan modification
221,939
Loan interest repaid during the year
(248,055)
At 31 December 2022 (Note 18)
2,494,021
Interest accrued in the year
328,197
Unwinding prior year loan modification
-
Loan interest repaid in the year
-
At 31 December 2023 (Note 18)
2,822,218
Transactions with Belgrave Naftogas B.V.
Belgrave Naftogas B.V. is a related party by virtue of Alastair McBain, who resigned as non-executive Chairman PetroNeft
on 21 October 2022, and former beneficial owner of 14.46% equity in PetroNeft. Mr. McBain initially was appointed non-
executive director on 29 January 2021 and later non-executive chairman on 19 February 2021.
During FY 2021, PetroNeft funded the acquisition of the incremental 40% equity holding in Russian BD Holdings B.V., through
the issuance of 80,000,000 PetroNeft ordinary shares to Belgrave Naftogas B.V., plus the seller provided PetroNeft a
convertible loan facility equally to US1.7M at bank of England base rate plus 8%. The loan advanced carried an option to
convert up to 50% of the loan facility into ordinary shares of PetroNeft at a price of GBP 0.02p per share. During 2021, lender
exercised their conversion rights and converted 50% of the original loan advance. The following is the history of the above-
mentioned transactions.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[57]
23. Related party disclosures (continued)
Transactions with Belgrave Naftogas B.V and PetroNeft.
2023
2022
Company- Loan to fund 40% acquisition
US$
US$
At 1 January
1,004,786
914,395
Advanced during the year
-
-
Interest accrued in year
133,638
90,391
At 31 December
1,138,425
1,004,786
Convertible Loan agreed in June 2019
PetroNeft entered a convertible loan facility of US$1.3M with a group of five investors in June 2019. All lenders listed below
elected in April 2021 to exercise their 65% conversion rights on the original loan advances. In January 2022, the lenders
agreed any loan principal balance outstanding may be converted at the rate of STG0.06p per Ordinary share of the Company.
As of 31 December 2023, the balance owing to the related parties on the June 2019 funding was as follows:
i
f
i
Lender
Amount
provided.
(US$)
Interest
accrued
and not yet paid.
(US$)
Amount
due
31
December 2023
(US$)
Relationship at time of
transaction
Natlata Partners
LLP.
196,000
88,837
284,837
Ultimate beneficial owner is
Maxim Korobov, former
PetroNeft director
ADM FZE
140,000
64,374
204,374
Ultimate beneficial owner is
Alastair
McBain,
former
PetroNeft
director
and
chairman
Daria
Shaftelskaya
84,000
37,843
121,843
Substantial shareholder of
PetroNeft
and
current
director.
David Sturt
17,500
8,034
25,534
PetroNeft
director,
executive Chairman and
shareholder
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[58]
23.
Related party disclosures (continued)
New Loan agreed in February 2021
PetroNeft entered a convertible loan facility of US$2.9M with a group of thirteen investors in February 2021. Of the thirteen
lenders seven are related parties. Up to 75% of the loan may be converted into ordinary shares of PetroNeft at GBP 0.02p
per share within 12 months of signing the loan agreement and 0.025p within 24 months of signing. The interest rate is the
Bank of England base rate plus 8%. Of the seven lenders listed below, all except David Golder, former Chairman PetroNeft
and Karl Johnson, previous vice president of Operations had elected to convert within the 2-year period from the anniversary
of the loan. As of 31 December 2023, the balance owing to the related parties on the February 2021 funding was as follows:
Lender
Amount
provided.
(US$)
Interest accrued
and not yet
paid.
(US$)
FVTPL
(US$)
Amount due
31 December
2022
(US$)
Relationship at time of
transaction
Natlata Partners
LLP.
137,500
39,886
177,386
Ultimate
beneficial
owner
is
Maxim
Korobov,
former
PetroNeft director
ADM FZE
137,455
40,318
177,773
Ultimate
beneficial
owner
is
Alastair
McBain,
former
PetroNeft director and
chairman
David Sturt
75,120
22,478
97,598
PetroNeft
director,
executive Chairman and
shareholder
Pavel Tetyakov
29,552
8,841
38,393
PetroNeft
Chief
executive officer and
shareholder
Karl Johnson
150,000
42,882
-
192,882
PetroNeft’s former vice
president of operations
Alken Kuanbay
15,946
4,426
20,372
PetroNeft
finance
director
David Golder
26,328
6,891
-
33,219
PetroNeft’s
former
Chairman
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[59]
24.
Share-based payment
Share options.
The expense recognised for employee services during the year is US$NIL (2022: US$NIL).
The Company currently does not have a share-based payment scheme in operation, post expiration of the previous plan in
2019.
•
At December 2022, share options remained outstanding in respect of options exercisable on the 2019 Convertible
loan principal sums outstanding, exercisable at £0.06stg per share and
•
In respect of the 4 participants in the 2021 Loan Convert who did not exercise during year 1 of the grant at £0.02stg,
or during year 2 of the grant at £0.025stg per share. This option expired as of 12 March 2023.
Share Options outstanding
2023
2022
US$
US$
In Issue.
-
16,939,795
-
16,939,785
25.
Accounting policies up to 31 December 2023
There was no change in accounting policies applicable to the comparative period ended 31 December 2022, as the Company
adheres to the latest accounting pronouncements and adhere to IFRS standards.
26.
Important Events after the Balance Sheet Date
The onset of the Russian / Ukrainian conflict, which has led the global community to the imposition of substantial and penal
sanctions on the Russian government and its officials. The sanctions led to prohibitions on doing business in any meaningful
commercial way in Russia. These sanctions continued to evolve through 2024.
.
On the 30 June 2023, the Company announced suspension of trading of its equities on both the A.I.M. and Euronext markets
pending publication of its audited annual report for FY 2022. Dealings in the Company's ordinary shares was therefore
suspended from 7.30 a.m. on Monday 3 July 2023 until such time as the Audited Accounts would have been duly
published. The Audited Accounts were not published by 31 December 2023, and the Company’s admission to AIM and
Euronext Growth was cancelled as of 4 January 2024.
On the 29 May 2024, Computershare withdrew its services as Registrar to the Company.
On the 9 and 11 July 2024, the Company received into its Irish Bank Account monies for the sale of LIneynoye LLC.
Accordingly, the sale of Lineynoye LLC was fully complete.
On the 2 August 2024, per the updated Share Certificate, provided by the Cypriot Registrar of Companies, Pavel Tetyakov
replaced PetroNeft Resources plc as equity holder, in the joint venture WorldAce Investments Limited.
On the 4 August 2024, Allied Irish Bank plc, withdrew its banking services to PetroNeft Resources plc.
Computershare termination included the disablement of the ISIN within Euroclear Bank system and this process was finalised
on 13 of September 2024. Computershare processed transactions through Euroclear bank up to that date and provided the
Share Register to the Company on the 19 September 2024 which reflects the final position per Computershare on their
records of the equity holders in PetroNeft as of 13 September 2024.
Through 30 September 2024, the Company discharged obligations owing to its Debt Holders, with the exceptions of monies
owing to Pavel Tetyakov and Natlata Partners Limited and came to full and final settlement agreement terms with non-
related third-party payables, with the exception of
Computershare Services, the then share registrar on record.
PetroNeft Resources plc
Notes to the Financial Statements
For the year ended 31 December 2023
[60]
27.
Contingent Liability
2023
2022
US$
US$
-
5,000,000
-
5,000,000
28.
Contingent Asset
As part of the sale of WorldAce Investment Limited and Granite LLC to Pavel Tetyakov, the Company secured an
option to recover up to 10% of the amounts of any shareholder loans or CMSA overhead recharge balance assigned to
Pavel Tetyakov and paid to him, as part of the sales process. Such options, for 12 months period, are expected to expire on
28 February 2025.
29.
Approval of financial statements
The financial statements were approved, and authorised for issue, by the Board of Directors on December 2024.
PetroNeft Resources plc
Corporate Governance Code (continued)
[61]
Corporate Governance Code
The London Stock Exchange, new AIM Rules were published in March 2018. One of the key amendments is in respect of AIM Rule 26 (as set out in AIM Notice 50), which now requires AIM
companies to state on their website which recognised corporate governance code they apply and how they have applied that code.
The Board of Directors of PetroNeft Resources Plc is committed, where practicable, to developing and applying exacting standards of corporate governance appropriate to the Company’s
size and stage of development. The Board of Directors seeks to apply the QCA Code, revised in April 2018 as devised by the Quoted Companies Alliance.
The Quoted Companies Alliance is the independent membership organisation that champions the interests of small to mid-size quoted companies. The QCA Code takes key elements of
good governance and applies them in a manner which is workable for the diverse needs of growing companies.
A revised version of the QCA Code (the “Revised Code”) was published in April 2018, based on the ‘comply or explain’ principle.
The QCA Code is constructed around ten broad principles (accompanied by an explanation of what these principles entail, under ‘application’) and a set of disclosures. The Code states
what is appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures.
The principles set out on our website ( http://petroneft.com/upload/iblock/06a/06a0d7603c177498ef08206cde0a0a80.pdf) explains how the Company where possible complies with the
QCA guidelines .
PetroNeft Resources plc
[62]
Glossary
1P
Proved reserves according to SPE standards.
2P
Proved and probable reserves according to SPE standards.
3P
Proved, probable and possible reserves according to SPE standards.
C1
Russian reserves approximately equivalent to SPE standard 1P reserves.
C2
Russian reserves approximately equivalent to SPE probable reserves.
C1+C2
Russian reserves approximately equivalent to SPE standard 2P reserves.
AGM
Annual General Meeting.
AIM
Alternative Investment Market of the London Stock Exchange.
Arawak
Arawak Energy Russia B.V.
bbl.
Barrel.
Belgrave Naftogas
Belgrave Naftogas B.V., formerly called Arawak.
bfpd
Barrels of fluid per day.
boe
Barrel of oil equivalent.
bopd
Barrels of oil per day.
Company
PetroNeft Resources plc.
CPF
Central Processing Facility.
CSR
Corporate and Social Responsibility.
Custody Transfer Point
Facility/location at which custody of oil transfers to another operator.
Dolomite
LLC Dolomite, a 100% subsidiary of PetroNeft registered in the Russian
Federation
DST
Drill stem test.
ESG
Environmental, Social & Governance
ESM
Enterprise Securities Market of the Irish Stock Exchange.
ESP
Electric Submersible Pump
Exploration resources
An undrilled prospect in an area of known hydrocarbons with unequivocal
four-way dip closure at the reservoir horizon.
Granite Construction
LLC Granite Construction, a 100% subsidiary of PetroNeft registered in the
Russian Federation
Group
The Company and its joint venture and subsidiary undertakings.
HSE
Health, Safety and Environment.
IAS
International Accounting Standard.
IFRIC
IFRS Interpretations Committee.
IFRS
International Financial Reporting Standard.
km
Kilometres.
km2/ sq. km
Square kilometres.
Licence 61
The Exploration and Production Licence in the Tomsk Oblast, Russia
owned by the joint venture Company WorldAce Investments Limited. It
contains seven known oil fields, Lineynoye, Tungolskoye, West
Lineynoye, Arbuzovskoye, Kondrashevskoye, Sibkrayevskoye and North
Varyakhskoye and numerous Prospects and Leads that are currently
being explored.
Licence 61 Farmout
An agreement whereby Oil India Limited subscribed for shares in
WorldAce, the holding Company for Stimul-T, the entity which holds
Licence 61 and all related assets and liabilities, and following, PetroNeft
and Oil India Limited both hold 50% of the voting shares, and through the
shareholders agreement, both parties have joint control of WorldAce
with PetroNeft as operator.
PetroNeft Resources plc
[63]
GLOSSARY (continued)
Licence 67
The Exploration and Production Licence in the Tomsk Oblast, Russia
owned by the subsidiary Company Russian BD Holdings B.V. It contains
two oil fields, Ledovoye and Cheremshanskoye and several potential
prospects.
Lineynoye
Limited Liability Company Lineynoye, a wholly owned subsidiary of
Russian BD Holdings B.V., registered in the Russian Federation.
m
Metres.
mmbbls
Million barrels.
mmbo
Million barrels of oil.
mm tons
Million tons of oil
Natlata
Natlata Partners Limited, a significant shareholder of PetroNeft.
NPV10
Net Present Value discounted at 10%
Oil pay
A formation containing producible hydrocarbons.
P1
Proved reserves according to SPE standards.
P2
Probable reserves according to SPE standards.
P3
Possible reserves according to SPE standards.
Pmean
The average of the values in the probabilistic distribution between
defined ‘boundary conditions. Universally regarded as the best single
value to quote or communicate for any uncertain distribution of
outcomes involved in repeated trial investigations.
P10
The value on a probabilistic distribution which is exceeded by 10% of the
outcomes.
P90
The value on a probabilistic distribution which is exceeded by 90% of the
outcomes.
PetroNeft
PetroNeft Resources plc.
POD
Plan of Development
QCA
Corporate Governance Code for small and mid-size quoted companies
2018
Russian BD Holdings B.V.
Russian BD Holdings B.V., a Company owned 90% by PetroNeft and
registered in the Netherlands.
SPE
Society of Petroleum Engineers.
Spud
To commence drilling a well.
Stimul-T
Limited Liability Company Stimul-T, a wholly owned subsidiary of
WorldAce, based in the Russian Federation.
TSR
Total Shareholder Return.
VAT
Value Added Tax.
WAEP
Weighted Average Exercise Price.
WorldAce
WorldAce Investments Limited, a Company owned 50% by PetroNeft,
registered in Cyprus.
WorldAce Group
WorldAce Investments Limited and its 100% subsidiary LLC Stimul-T
PetroNeft Resources plc
[64]
THE FOLLOWING PAGE IS REQUIRED, BUT SHOULD NOT BE INCLUDED IN THE ANNUAL REPORT