Annual Report and Financial Statements
For the year ended 31 December 2018
Registered number 3542727
REABOLD RESOURCES PLC
Financial statements for the year ended 31 December 2018
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Contents
Officers and professional advisors
Highlights
Chairman’s statement
Strategic report
Board of directors
Directors’ report
Corporate governance report
Statement of directors’ responsibilities
Independent auditor’s report
Group statement of comprehensive income
Group statement of financial position
Company statement of financial position
Group statement of cash flows
Company statement of cash flows
Group statement of changes in equity
Company statement of changes in equity
Page
2
3
4-11
12-20
21
22-24
25-30
31
32-36
37
38
39
40
41
42
43
Notes to the financial statements
44-69
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REABOLD RESOURCES PLC
Officers and professional advisers
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Directors
Secretary
Registered Office
Jeremy Edelman (Chairman)
Sachin Oza
Stephen Williams
Marcos Mozetic
Michael Felton
Anthony Samaha
Anthony Samaha
20 Primrose Street
London
EC2A 2EW
Registered number
3542727
Solicitors
Auditor
Nominated advisor
Brokers
Registrar
Bankers
Hill Dickinson LLP
20 Primrose Street
London
EC2A 2EW
Mazars LLP
Tower Bridge House
St. Katharine’s Way
London
E1W 1DD
Strand Hanson Limited
26 Mount Row
London
W1K 3SQ
Whitman Howard Limited
1st Floor, Connaught House
1-3 Mount Street,
London W1K 3NB
Turner Pope Investments
Becket House,
36 Old Jewry,
London, EC2R 8DD
Neville Registrars Limited
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Barclays Bank Plc
Level 27
1 Churchill Place
London E14 5HP
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REABOLD RESOURCES PLC
Highlights
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Reporting Period
• Raised £12.6m before costs, primarily from institutional investors to support the Company’s strategy
• Completed acquisition of 100% of Gaelic Resources Limited (“Gaelic”) which holds the rights to earn-in up to a 50% interest
in near term, high-impact oil & gas leases in California, United States
•
•
•
Further investment of £2.3m in Corallian Energy Limited (“Corallian”) to increase Reabold’s interest to 32.9%
Investment of £1.9m in Danube Petroleum Limited (“Danube”) for a 33.3% interest
Investment of £3.0m in Rathlin Energy (UK) Limited (“Rathlin”) for a 37.1% interest
• Commercially successful drilling and work over programme in California
•
Two commercial oil discoveries on West Brentwood licence in California
Post Reporting Period
•
Two commercial oil discoveries on Monroe Swell licence in California
• Oil discovery at Corallian’s Colter project
• Danube to spud first well of two well Parta appraisal programme in Romania in June 2019
• Corallian awarded five new licences by the Oil and Gas Authority as part of the 31st Offshore Licensing Round in the UK
• Discovery at West Newton appraisal well operated by Rathlin, potentially the largest UK onshore gas field, and the largest
hydrocarbon discovery onshore UK since 1973
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REABOLD RESOURCES PLC
Chairman’s statement
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The year ended 31 December 2018 has been a further transformational year for Reabold Resources Plc (“Reabold” or the “Company”)
as Sachin Oza and Stephen Williams, the Co-Chief Executive Officers, lead the Company and its subsidiaries (the “Group”) in
advancing its investment strategy in the exploration and production (“E&P”) sector.
The reporting period has seen significant progression in the Company’s investing policy to acquire direct and indirect interests in
exploration and producing projects and assets in the natural resources sector. Whilst the Company has to date focused its investments
in the UK, Europe and North America, consideration continues to be given to investment opportunities in other jurisdictions.
As an investor in upstream oil & gas projects, Reabold aims to create value from each project by investing in undervalued, low-risk,
near-term upstream oil & gas projects and by identifying potential monetisation plans prior to investment. Reabold’s long term strategy
is to re-invest capital made through its investments into larger projects in order to grow the Company. Reabold aims to gain exposure
to assets with limited downside and high potential upside, capitalising on the value created between the entry stage and exit point of its
projects.
Corallian Energy
On 1 November 2017, the Company made its first investment under its focused investment strategy, entering share subscription
agreements to acquire a total of 1,111,111 new Corallian shares at £1.35 per share, for a total investment of £1,500,000. Corallian is a
private UK oil & gas appraisal and exploration company, which has a portfolio of UK oil & gas licences, including the Colter and
Wick appraisal and exploration projects. The first £500,000 subscription in Corallian was completed on signing of a subscription
agreement, with a further £1,000,000 subscription completed in May 2018.
On 12 February 2018, Reabold announced that Corallian was intending to raise additional capital in order to increase Corallian’s
exposure to the Colter prospect from 40% to 50%, to increase its exposure to the Wick prospect from 25% to 40%, and to further
progress additional assets. The Company was pleased to have supported this fund raising, entering into two further subscription
agreements with Corallian. The first agreement was an unconditional subscription for 333,333 new Corallian shares at £1.50 per share
for an investment of £500,000, which was completed in February 2018. The second agreement gave Reabold the option to subscribe
for an additional 333,333 new Corallian shares, at a price of £1.50 per share, for an investment of £500,000 at any point up to 6 April
2018, which was completed prior to the expiry date.
On 11 December 2018, the Company announced that Corallian has raised £912,300 by way of an advanced subscription agreement,
with Reabold participating in this fund raise with an investment of £300,000, maintaining its 32.9% interest. The additional shares to
be issued under the advanced subscription agreement are priced at the higher of either a 30% discount to the price achieved in the next
Corallian funding round, or at £1.50 per share (in line with the price per share at the previous fund raise) if no funding round has
occurred within 12 months.
Completion of the above subscriptions resulted in Reabold investing a total of £2,800,000 for a 32.9% interest in Corallian as at 31
December 2018.
In December 2018, Corallian received final regulatory approvals for the drilling of the Wick and Colter wells, which were drilled as a
back-to-back programme using the ENSCO-72 jack-up rig, commencing first with the drilling of the Wick well in December 2018.
Following completion of the Wick well, the rig was mobilised from the Moray Firth to the English Channel to drill the Colter well, in
February 2019.
In January 2019, the Company was disappointed to announce that Corallian, operator of the Wick well located in the UKCS Block
11/24b (Licence P2235), had informed the Company that the target Beatrice sands, whilst present in the well, were water bearing. The
well had been drilled to a total depth of 1,000 metres. Whilst we were disappointed with the result of the Wick well, we considered
Wick to be the highest risk prospect in our portfolio and not representative of the typical Reabold appraisal target.
In February 2019, the Company was pleased to report that Corallian encountered pay1 within the Colter South fault block. The Colter
well (98/11a-6) was drilled as a vertical well with the ENSCO-72 jack-up rig and reached a Total Depth of 1,870 metres MD (measured
depth) in the Sherwood Sandstone.
1 A reservoir or portion of a reservoir that contains economically producible hydrocarbons
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Chairman’s statement
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The Company was pleased that the well confirmed a discovery in the Colter South Prospect for which Corallian had estimated a PMean
recoverable volume of 15 million barrels of oil equivalent (mmboe) pre-drill.
Encouraged by the results at the Colter prospect, in February 2019, the Company secured an additional equity investment into Corallian,
by way of an advanced subscription agreement, whereby Reabold invested £750,000, which will be priced at a 30% discount to the
next Corallian fundraise. This investment would cover Corallian’s expected costs in relation to the sidetrack to appraise the principal
Colter oil discovery.
In March 2019, the sidetrack operation at the Colter well was completed. The purpose of the well had been to delineate the Colter
structure accurately to complement the existing well and seismic data in the area. As previously announced, the anticipated controlling
fault between the Colter and Colter South areas is further to the north than had been mapped on the 3D seismic.
We were delighted to make an oil discovery with the Colter well, and with the sidetrack effectively giving us two wells worth of data,
the operator is now in a position to undertake the necessary work to determine the optimum forward plan. The data from these well
results and existing data will be incorporated to determine the best forward plan.
On 5 June 2019, the Company announced that Corallian has been offered five new licences by the Oil and Gas Authority as part of the
31st Offshore Licensing Round, offering blocks in frontier areas of the UK Continental Shelf. Three of these new licences have been
awarded with joint venture partners, while the other two have been offered on a 100% interest basis. The five licences comprise 22
blocks and part blocks, including one in the English Channel (49%. interest), two in the Inner Moray Firth (40%. interest each), one in
the Viking Graben (100% interest) and one in the West of Shetland basin (100% interest).
Danube Petroleum
On 4 December 2017, the Company announced its second portfolio investment, , whereby it entered into an agreement with Danube,
which was then a wholly owned subsidiary of ASX listed ADX Energy Ltd (ASX:ADX) (“ADX”), to invest a total of £1,500,000 for
a 29% interest in Danube. Danube was a newly-formed UK private oil and gas company, which at the time held a 50% interest in the
high impact Parta licence ("Parta"), onshore Romania, and a 100% interest in a low-risk appraisal campaign within Parta, comprising
of two wells planned to test 49.9 billion cubic feet (bcf) prospective and contingent resources.
The first tranche of the Company’s investment in Danube of 375,940 new Danube shares at £1.00 per share for an investment of
£375,940 was completed in March 2018, with the second tranche of 1,127,819 new Danube shares at £1.00 per share for an investment
of £1,127,819 being completed following submission of an Authorisation for Expenditure for the first appraisal well (the “First Parta
Appraisal Well”) on 17 September 2018.
In addition, Reabold held an option to acquire a further 375,940 shares in Danube, at a price of £1.00 per share, which could be
exercised at the discretion of the Company within the six months following completion of the transaction. In November 2018, the
Company exercised this option and invested a further £375,940 in Danube. Following the above subscriptions, Reabold had invested
a total of £1,879,700 for a 33.3% interest in Danube.
In October 2018, the Company announced that Danube had entered into a Sale and Purchase Agreement (the “SPA”) to purchase a
100% interest in the Iecea Marea Production Licence (the “IM Production Licence”) from the Romanian oil & gas production company,
Amromco Energy SRL (”Amromco”). Under the terms of the SPA, Danube paid Amromco an initial fee of €10,000, followed by a
further €20,000 and a 5% royalty for production from future wells located within the IM Production Licence. The acquisition of the
IM Production Licence enables the Parta Appraisal well to be drilled from an optimal location within the IM Production Licence area
and enhances Danube’s ability to organically develop other high-value gas production opportunities in the area.
On 11 December 2018, the Company announced that it had been in discussions with ADX regarding the timing of the ADX
commitment to invest US$500,000, either directly or via a third party, into Danube at £1.00 per share. This is the price per share at
which all Reabold investments have taken place to date into Danube. As a result of this process, in December 2018, Reabold and ADX
entered into a subscription agreement (the “Subscription Agreement”) to extend the deadline for this investment, and agreed the
following funding commitments and options:
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Chairman’s statement
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1) Under the terms of the Subscription Agreement, ADX committed to either invest directly or source investment from a third
party for £375,940 on the same terms as Reabold's investments prior to 15 March 2019 (at £1.00 per share). In the event that
ADX did not complete (or procure a third party to complete) the ADX Investment by 15 March 2019, ADX agreed to grant
Reabold the right to subscribe to the shares at an issue price of £0.80 per new Danube share.
2) Reabold had the option to subscribe to a further 375,940 Danube shares at an issue price of £1.00 per share at any time prior
to 15 March 2019.
In addition, pursuant to the Subscription Agreement, Reabold and ADX agreed to grant the following options to subscribe for shares
in Danube in order to provide funding for the second Parta Appraisal Well (“Second Parta Well Funding”):
1) Reabold may subscribe for a further 1,627,604 Danube shares at an issue price of £1.20 per share by electing to do so within
six weeks of receipt of well logging data from the final logging run on the First Parta Appraisal Well. The monies raised by
Danube, should Reabold elect to subscribe for these shares, would be £1,953,125.
2) ADX may subscribe for a further 651,042 Danube shares at an issue price of £1.20 per share by electing to do so within six
weeks of receipt of well logging data from the final logging run on the First Parta Appraisal Well. The monies raised by
Danube, should ADX elect to subscribe for these shares, would be £781,250.
3) Reabold and ADX may exercise their respective options to acquire shares up to a value of £1,953,125 for Reabold and
£781,250 for ADX at any time prior to the spudding of the First Parta Well at a subscription price of £1.00 per Danube share
rather than £1.20 per Danube share.
The agreed funding options provided a framework to fund the drilling, testing and completion for production of the two planned Parta
Appraisal wells. Assuming the above funding options are exercised, up to £4,910,225 (approximately US$6.2m) of funds would be
provided to Danube by the parties.
On 19 March 2019, ADX provided an update on the Parta appraisal operations in Romania. Danube owns 100% of the Parta Exploration
Permit, in which the IM Production Licence is located. The planned First Parta Appraisal Well is expected to spud in late-June 2019.
Danube selected IM-1 as the first drilling candidate for the appraisal programme (i.e. the First Parta Appraisal Well) as it sits within
the IM Production Licence and Danube believes a successful well on the Production Licence can be put into production more readily.
The IM-2 well is located within Parta Exploration Permit but outside of the IM Production Licence.
The spudding of IM-1 will be later than previously planned, primarily due to Danube’s preference to drill IM-1 from within the IM
Production Licence, which needed to be formally transferred from Amromco before the government authority could issue a drilling
permit. Furthermore, despite the acquisition of the IM Production Licence completing in October 2018, the full data set utilised for
prospect evaluation and planning for the IM Production Licence was not provided to ADX until 19 December 2018.
IM-1 is targeting multiple pay zones, including established appraisal potential from historical wells drilled in the 1980s one of which
was tested but never produced. An independent report prepared by ERC Equipoise Pte Ltd (“ERCE”) in mid-2018, assessed the
contingent and prospective resource potential of IM-1 of 18.8 bcf on a P50 basis2. This excludes deeper exploration potential, which
will be accessed by the IM-1 well. ERCE has assessed a contingent and prospective resource, excluding the exploration potential, of
49.9 bcf across IM-1 and IM-2 on a P50 basis.
The most likely cost estimate for the IM-1 well is currently US$3m, for which Danube is fully funded, including evaluation, logging
and running casing. This cost estimate does not include well testing operations which are planned to be undertaken with a much smaller
and lower cost work over unit. Included in the well cost estimate is a well head and production tubing, which has already been
purchased.
2 A 50% probability that a stated volume will be equaled or exceeded.
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REABOLD RESOURCES PLC
Chairman’s statement
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On 8 April 2019, Reabold was pleased to announce that a binding Heads of Agreement had been signed between Danube's wholly
owned subsidiary, ADX Energy Panonia Srl, and an Australian private company, Parta Energy Pty Ltd, (the “Farminee”) to fund a
planned US$1.5m seismic programme on Danube's Parta Exploration Licence (“Parta Licence”), onshore Romania. Completion of this
seismic programme will earn the Farminee a 50% interest in the Parta Licence (the “Farm-In”).
Danube currently holds a 100% interest in the Parta Licence, following the withdrawal of previous partner Rohöl-Aufsuchungs
Aktiengesellschaft (“RAG”) on 31 March 2019 and, following completion of the Farm-In, Danube will again have a 50%. interest in
the Parta Licence. The Farm-In excludes the Parta Appraisal Programme Area, in which Danube has a 100% interest, and expects to
drill the IM-1 appraisal well in Q2 2019, as announced on 19 March 2019. The Farminee is a company formed to undertake exploration
in Romania, with guaranteed financial support to undertake its Farm-In obligations. The agreement is conditional on finalisation of a
joint operating agreement and the extension of the Licence for a further two years.
The Farminee will fund the first US$1.5m of expenditure, for the acquisition of approximately 100 km2 of 3D seismic to earn a 50%
participating interest in the Parta Licence. ADX expects all Farm-In funding conditions to be met by the end of June 2019 and will
commence planning the seismic programme during Q3 2019, with a view to seismic acquisition occurring during Q4 2019. ADX has
previously acquired approximately 100km of 2D seismic and 50km2 of 3D seismic, and has licenced (with landowners) an area of
approximately 200km2 for future 3D seismic acquisition within the Parta Licence. The Parta Licence activities are intended to provide
low risk, high reward exploration follow up drilling locations for Danube, following on from the Parta Appraisal Programme.
This was a highly encouraging development for Danube and we are also encouraged to see additional interest in putting capital to work
in Romania. With RAG making the decision to withdraw from all E&P activities, their 50% equity position has effectively been
swapped into an enthusiastic new entrant that is putting an additional US$1.5m into the asset, to further develop the Parta Licence.
Whilst the focus in Romania has always been on the imminent appraisal programme, a key attraction of our Danube position has always
been the additional prospectivity and running room within the Parta Licence area. This seismic programme is a key step towards
further unlocking that potential and building an E&P business of scale in Romania, without any additional capital being required from
Danube or Reabold.
On 9 May 2019, the Company was pleased to announce that it had agreed to subscribe for a further 375,940 ordinary shares in Danube
at an issue price of £1.00 per share, increasing Reabold’s interest in Danube from 33.3% to 37.5%. In addition, ADX, on behalf of
Danube, has agreed to engage Reabold for a period of 12 months to provide Corporate Advisory Services to Danube for an annual fee
of approximately £75,000.
On 30 May 2019, the Company was pleased to announce that Danube has received all the required permits from the relevant bodies
and secured all the key services and materials required to enable the drilling of the IM-1 appraisal well. The construction of the well
site and access road is expected to be completed within 6-8 weeks, following which, the IM-1 well will be drilled immediately.
It should be noted that all approvals and permits have already been secured for the Iecea Mica 2 well, the second planned well in the
Parta appraisal programme.
Gaelic Resources
On 4 July 2018, the Company was pleased to announce the completion of the acquisition of 100% of the issued share capital of Gaelic
for the issue of 420 million new ordinary shares in Reabold (the “Consideration Shares”), representing £2,625,000 at the closing price
of 0.625p per share on AIM on 4 July 2018 (the “Gaelic Acquisition”). The Gaelic Acquisition provides Reabold with options to
participate in multiple near-term, high-impact oil and gas leases in California, United States (the “Leases”).
The acquisition of Gaelic was considered by management to be a perfect fit with the Reabold strategy, providing high-impact drilling
opportunities in California, with considerably de-risked wells with low drilling costs and a fast path to monetisation. The Company
has been delighted with the commercial success of the drilling programme to date, demonstrating the effectiveness of this strategy.
Gaelic’s wholly owned subsidiary, Temporary Energy LLC (“Temporary”), holds the rights to earn-in to 50% of the Leases by drilling
up to five wells by the end of 2019, pursuant to an agreement entered into with Sunset Exploration, Inc (the “Earn-in Agreement”).
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REABOLD RESOURCES PLC
Chairman’s statement
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Successful wells have been put into production, providing cash flow for further drilling activity. The Leases are operated by Integrity
Management Solutions (“Integrity” or the “Operator”), a California operating company that leads direct operational decisions
pertaining to the Leases. The five-well drilling programme is expected to cost Reabold up to approximately US$7m.
An outline of Temporary’s California projects is set out below:
(i)
Monroe Swell Redevelopment:
• Redevelopment of four out of seven existing production wells with oil in place of 1mmbbl (million barrels)3
• Operator estimate of potential value to Reabold US$10m3
(ii) Monroe Swell Drilling:
• 3D defined, high-impact shallow prospects
• Operator estimates potential resource of more than 4mmbbl of oil3
• Two-well programme to earn-in to 50% of the asset, the first to be drilled before the end of 2018, the second by mid-2019
• Both wells were drilled by 1 April 2019, earning Reabold a 50% interest
• Operator estimate of potential value to Reabold US$100m3
(iii) West Brentwood:
• Oil field with significant historical production
• Up-dip portion of the field expected to be undrained; well defined by 3D seismic
• 1-2mmbbl of oil in place3
• Temporary has earned a 50% equity interest in the licence
• Operator estimate of potential value to Reabold of US$25m3
(iv) Grizzly Island:
• Gas prospects with 50-90 bcf recoverable3
• Defined by 70 square mile 3D seismic data
• Temporary has the right to earn into a 50% equity interest in the licence
• Operator estimate of potential value to Reabold: US$50-100m3
Monroe Swell Redevelopment
In August 2018, the Company was pleased to complete the four well workover programme consisting of the Doud A-1, A-2, A-3 and
A-7 wells, with the wells brought into initial production, and Reabold earning a 50% working interest in the wells. The Doud wells
had been partially shut in post the very heavy rains experienced in California, with a plan to return to higher production following the
Burnett well programme which continues.
West Brentwood
As part of the Earn-in Agreement, Reabold funded the VG-3 well to earn a 50% equity interest in the West Brentwood licence. In
August 2018, the drilling of VG-3 commenced targeting the up-dip portion of a previously produced field which has been identified
on 3D seismic.
On 30 August 2018, the Company was delighted to announce that Integrity, the contract operator of the Company’s California
investments, had informed the Company of a commercial hydrocarbon discovery at the VG-3 well that would be completed as a
producer. In September 2018, VG-3 was successfully tested and in November 2018 it was put into production.
Given the success of the VG-3 well, the decision was made to prioritise the drilling of a second well on the West Brentwood licence,
in which the Company has earned a 50% interest, ahead of the drilling of a well on Grizzly Island.
3 As provided by Integrity Management Solutions, contract operator of the licences.
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REABOLD RESOURCES PLC
Chairman’s statement
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On 3 January 2019, the Company was informed by Integrity of a successful drilling result at the VG-4 well, with significant oil and
gas shows in the targeted formation. The well was put on production at a constrained rate due to the associated gas being produced
with the oil and, on 29 April 2019, the Company announced that, work was underway to complete a tie into the nearby gas pipeline.
This will allow the VG-4 well to produce oil at a higher rate, as well as allowing the sale of the gas produced from the well. Integrity
awaits an Encroachment Permit from the California Division of Oil, Gas and Geothermal Resources required to complete the tie-in due
to the proximity of the pipeline to a public road. VG-4 has been shut in whilst this final stage of the works is completed.
Success at VG-4 is a great result, both in terms of the substantial increase in cash flow that we can generate from West Brentwood, and
in proving that we have significant running room within our California portfolio. We continue to be impressed by the performance at
West Brentwood, and we are actively considering the potential for additional wells to further accelerate the already impressive cash
flow.
Monroe Swell
Pursuant to the Earn-in Agreement with Sunset Exploration, Reabold will pay the full drilling and completion costs of two wells within
the Monroe Swell licence areas in order to earn a 50% net working interest in these licences. Additional activity beyond the initial two
wells will be funded by Reabold on a 50% working interest basis. Similar to West Brentwood, the wells on Monroe Swell targeted the
up-dip parts of previously produced parts of the field which had been identified on 3D seismic.
On 11 March 2019, Reabold was pleased to announce that Integrity had informed the Company of a successful drilling result and oil
discovery at the Burnett 2A well in California. Following the Burnett 2A drilling results, Reabold and Integrity made the decision to
seek accelerated permitting for the Burnett 2B well. On 1 April 2019, Reabold announced that Integrity had informed the Company
of a successful oil discovery at the Burnett 2B well.
Following the drilling and completion of the Burnett 2B and 2A wells, Temporary has completed its earn-in to the Monroe Swell
licence area and has been assigned a 50% equity interest. Future activity at the Monroe Swell field will be undertaken at a 50% paying
interest to Temporary.
Success with the Burnett 2A and 2B wells is highly encouraging. With low drilling and completion costs, short drilling times and
substantial running room, Monroe Swell can deliver substantial production growth, coupled with highly attractive returns. Monroe
Swell is expected to be a multi-well project which can unlock significant NPV4 potential.
Grizzly Island
In view of the success of the West Brentwood and Monroe Swell programmes, the drilling in Grizzly Island is now planned for later
this year.
Rathlin Energy
On 30 November 2018, the Company completed a subscription agreement with Rathlin, a wholly-owned subsidiary of Calgary-based
Connaught Oil & Gas Limited (“Connaught”), to invest a total of £3,000,000 (the “investment”) for an equity interest of 37.08% in
Rathlin, which is the operator of the PEDL183 licence onshore UK. The investment was conditional on, inter alia, the completion of
a farm out, by Rathlin, of PEDL183 to Union Jack Oil plc (“Union Jack”) and Humber Oil & Gas Ltd (“Humber”) (the “Farm Out”)
which resulted in Rathlin retaining a 66.67% equity interest in PEDL183. The licence contains the significant West Newton A-1 gas
discovery, and the investment has been utilised, together with the Farm Out, to fund the drilling of an appraisal well on this discovery
during Q1/Q2 2019.
4 Net present value
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REABOLD RESOURCES PLC
Chairman’s statement
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Project Highlights:
• Q1 2019 drilling programme, designed to test two high-impact targets
• Gross Contingent Resource of 189bcfe (31.5mmboe) assigned to the West Newton A-1 gas discovery
• Gas appraisal target with an estimated 72% chance of success and gross NPV (10) of US$247m5
• Additional future upside from the testing of the reef flank Cadeby formation oil prospect, with gross Prospective Resource of
79.1mmboe
• Cadeby oil exploration target which has an estimated 24% chance of success and gross NPV (10) of US$850m5
• Planning permission for the appraisal well is in place and the target is drill ready
• Connaught Management estimates supported by a 2017 Competent Person's Report (CPR)
On 26 April 2019, Reabold was pleased to announce that drilling operations had commenced at the West Newton A-2 appraisal well,
onshore UK. Drilling operations will first consist of one well drilling into the Kirkham Abbey Formation gas discovery, de-risking
189 bcfe (billion cubic feet equivalent) Contingent Resources, before then targeting the deeper Cadeby Formation oil exploration target
which has gross Prospective Resources of 79.1mmboe.
In a success case, West Newton offers a fast pathway to monetisation through its proximity to existing gas pipelines and infrastructure
in the local area. The West Newton A-2 appraisal well will be drilled to a total depth of approximately 2,061 metres below ground
level and it was expected to take circa 40 days to complete drilling operations.
The Company believes that West Newton is extremely attractive, due to both its scale and its location, and the West Newton A-1
discovery suggests that Rathlin may have one of the largest onshore UK gas fields. Reabold is pleased to have provided the funding
for the appraisal well that can potentially prove up its considerable value.
On 17 June 2019, the Company was pleased to announce that the West Newton A-2 appraisal well had been successful, which confirms
Connaught’s previous assessment that West Newton could potentially be the largest UK onshore gas field, and the largest hydrocarbon
discovery onshore UK since 1973. Preliminary data suggests West Newton 2C Contingent Resources5 is at least the pre-drill estimate
of 189bcf, the equivalent of 31.5mmbbl of oil. The data from the A-2 appraisal well is subject to further testing, which is required to
determine flow rates and inform the forward work programme. The extended well test operations are expected to commence during
Q3 2019.
Rathlin currently has a 66.67% interest in PEDL183, with both Union Jack Oil plc and Humber Oil & Gas Limited holding 16.665%
of the licence. Reabold currently has an approximate 24% economic interest in PEDL183, via its approximate 36% equity interest in
Rathlin. Connaught currently holds an approximate 35% equity interest in Rathlin.
Placings
In March 2018, the Company was delighted to complete a significant fund raising of £7.75m (before expenses) through the issue of
1,291,750,000 new ordinary shares at a price of 0.6 pence per share, to support the Company’s investment policy.
In September 2018, the Company was pleased to complete a further fund raising of £4.83m (before expenses), through the issue of
568,908,823 new ordinary shares at a price of 0.85 pence per share, to further support the Company’s investment policy.
The Company was delighted by the support given by institutional investors to the placings, including welcoming significant new
institutions to the share register.
5 Connaught Management estimate (Note: this estimate is based on the economic evaluations run by Deloitte LLP for
the CPR, updated by Connaught to reflect the most recent price forecasts provided by Deloitte)
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Chairman’s statement
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Nominated Adviser and Board Changes
On 17 September 2018, Reabold was pleased to announce the appointment of Strand Hanson Limited as Nominated Adviser (Nomad)
to the Company and Marcos Mozetic and Mike Felton as Non-Executive Directors.
Marcos Mozetic, an exploration geologist, brings over 41 years of international technical experience in the oil and gas industry to the
Company. His most recent experience was in designing, implementing and leading Repsol S.A.'s exploration strategy between 2004
and 2016. During this period Repsol become a leader in reserve replacement and participated in some of the most exciting discoveries
worldwide. Previous to this, Marcos worked as a development geologist in 1975 with Bridas, before moving into the exploration
department, which he later led. Following this, Marcos worked for BHP Petroleum and BHP Minerals as Chief Geologist for Argentina
and later Country Leader. Marcos holds a BSc and post-graduate degree in Petroleum Geology from the University of Buenos Aires.
The Board looks forward to reporting further in due course.
Mike Felton is an experienced fund manager in the City and brings over 29 years of financial expertise to the Company. Mike previously
served as Head of UK Retail Equities at M&G Investments and was Manager of the M&G UK Select Fund, growing the fund's assets
from £110m to circa £550m at its peak. Mike has also previously served as Joint Head of Equities at ISIS Asset Management and
Manager of ISIS UK Prime Fund, as well as Chief Investment Officer at Lumin Wealth, a position he still retains part-time. Mr Felton
sits on the International Tennis Federation's Investment Advisory Panel and is a Business Ambassador for Anthony Nolan, the UK's
blood cancer charity and bone marrow register.
This report was approved by the Board and signed on its behalf:
Jeremy Edelman
Chairman
26 June 2019
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Much has been achieved in the reporting period, including:
•
•
•
•
two rounds of fundraising attracting strong institutional support;
investments in Corallian, Danube and Rathlin, funding exciting (and potentially transformational) drilling campaigns;
the acquisition of 100% of Gaelic and commercial drilling success; and
evaluating a number of further exciting potential transactions, consistent with our strategy.
These achievements are just the first part of executing our differentiated strategy, which is tailored to create shareholder value against
an industry backdrop that has caused widespread share price underperformance in junior exploration and production companies since
2012.
Our strong focus on this sector during our many years in the asset management industry leaves us fully understanding the frustration
felt by investors experiencing falling share prices despite sound underlying asset bases. At the core of the Reabold strategy is the
conversion of quality assets into positive share price performance, and this mindset drives everything that we do.
This is a very exciting time in the upstream oil & gas industry; costs remain extremely low following the downturn, and with a healthy
commodity price outlook, project returns (for high quality assets) are more robust than has been the case for quite some time. As such,
this is the ideal time to put capital into the ground, and the lack of activity in conventional oil & gas over the last half a decade has
resulted in an abundance of interesting projects in need of financing.
We are extremely excited by the return potential these opportunities provide Reabold investors and look forward to embarking on a
further multi-well transformational drilling campaign over the next twelve months.
Business Model
Reabold invests in the E&P sector. The Company's investing policy is to acquire direct and indirect interests in exploration and
producing projects and assets in the natural resources sector, and consideration is currently given to investment opportunities anywhere
in the world.
As an investor in upstream oil & gas projects, Reabold aims to create value from each project by investing in undervalued, low-risk,
near-term upstream oil & gas projects and by identifying potential monetisation plans prior to investment.
Reabold’s long term strategy is to re-invest capital made through its investments into larger projects in order to grow the Company.
Reabold aims to gain exposure to assets with limited downside and high potential upside, capitalising on the value created between the
entry stage and exit point of its projects. The Company invests in projects that have limited correlation to the oil price. The value
realisation of a project is determined by monetising the asset (putting it into production or selling it). The entry price versus the
monetisation price is determined, primarily by the derisking event of drilling.
Reabold’s non-operator model helps to keep costs low and facilitate a fully diversified portfolio.
Reabold has a specific strategy to fund other operators’ appraisal wells, assessed as high quality, high return projects that have been
technically de-risked by previous drilling. The projects targeted have relatively quick cycle times to monetisation.
In order to maximise the return profile, identifying the optimal time to exit a project is critical to Reabold’s strategy. Doing so
effectively will allow the company to scale and attract more capital over time. Monetisation of investments depends on the extent of
any success and market conditions, which are principally:
i)
an asset sale or IPO; and/or
ii) putting the asset into production.
Reabold has effectively two business streams:
i) monetisation of investments through asset sale or IPO within 18 to 24 months upon major valuation milestone of drilling
success; and
ii) monetisation of investments by putting the asset into production.
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Reabold has a highly-experienced management team, who possess the necessary background, knowledge and contacts to carry out the
Company's strategy. Management believes the current distress in the oil & gas industry presents an opportune time to deploy capital in
undervalued assets with huge potential.
Corallian
In February 2019, the Colter well (98/11a-6) was drilled as a vertical well with the ENSCO-72 jack-up rig, reaching a Total Depth of
1,870 metres MD in the Sherwood Sandstone. This well was an appraisal of the 98/11-3 well, drilled in 1986 by British Gas, within
the Colter Prospect. The 98/11a-6 well unexpectedly remained on the southern side of the Colter Prospect bounding fault but
encountered oil and gas shows over a 9.4 metres interval at the top of the Sherwood Sandstone reservoir. A petrophysical evaluation
of the LWD data has calculated a net pay of 3 metres. Similar indications of oil and gas were encountered in the 98/11-1 well, drilled
in 1983 by British Gas, within the Colter South fault terrace. Provisional analysis of the new data indicates that the two wells may
share a common oil-water-contact having both intersected the down-dip margin of the Colter South prospect. Corallian’s most recent
assessment of the Colter South Prospect prior to drilling the 98/11a-6 well had estimated a mean recoverable volume of 15mmbbls.
Further work will be required to refine this assessment with the new well data.
The joint venture subsequently side-tracked the 98/11a-6 well. The side-track was drilled directionally to a Sherwood Sandstone target
within the Colter prospect on the northern side of the bounding fault. In March 2018, the sidetrack operation at the Colter well was
completed. The purpose of the well had been to delineate the Colter structure accurately to complement the existing well and seismic
data in the area. As previously announced, the anticipated controlling fault between the Colter and Colter South areas is further to the
north than had been mapped on the 3D seismic.
Following completion of drilling, it has now been determined that the majority of the potential resource resides within the Colter South
portion of the play. The more northerly location of the fault results in a larger areal extent than previously mapped at Colter South,
which modelled a 15mmbbl Pmean6 potential resource within the Colter South Prospect. Further work will now be undertaken to
evaluate the resource size at Colter South, incorporating this new data. However, this also results in a smaller areal extent of the Colter
feature north of the fault, which is unlikely to yield additional commercial volumes.
The data from these well results will be used to determine the forward plan to maximise the potential value associated with the Colter
South Prospect. In addition, the side-track encountered oil and gas shows in the Jurassic Cornbrash-Lower Oxfordian interval, the
producing reservoirs in the Kimmeridge oilfield, and this provides an interesting potential target on trend to the west within the onshore
licences held by the Joint Venture.
We were delighted to make an oil discovery with the Colter well, and with the sidetrack effectively giving us two wells worth of data,
the operator is now in a position to undertake the necessary work to determine the optimum forward plan. The data from these well
results and existing data will be incorporated to determine the best forward plan. This offsets the disappointment around the lack of
commerciality within the northern Colter fault terrace.
On 5 June 2019, the Company announced that Corallian has been offered five new licences, comprising 22 blocks and part blocks,
including one in the English Channel (49% interest), two in the Inner Moray Firth (40% interest each), one in the Viking Graben (100%
interest) and one in the West of Shetland basin (100% interest). The fact that Corallian has been awarded 22 new blocks and part blocks
out of a total of just 144 by the Oil and Gas Authority as part of the 31st Offshore Licensing Round in the UK, demonstrates the
significant capability and experience of its management team in identifying opportunities. In particular, the award of blocks around the
Colter discovery is a highly important step for Corallian in realising further potential in the area and ultimately generating value for
Reabold shareholders.
Danube
Reabold’s investment in Danube offers the Company exposure to the low-risk, high-impact, Parta licence, onshore Romania, in line
with Reabold’s strategy, and a two-well appraisal campaign is scheduled for 2019. The objective of the campaign is to test 49.9 bcf of
prospective and contingent resources, delineated by 3D seismic data, gross to Danube, which ADX estimates will generate US$128m
of NPV to Danube.
6 The expected average value or risk-weighted average of all possible outcomes
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Parta particularly stood out as an opportunity due to the low drilling and operating costs and low risk nature of the appraisal drilling
from a subsurface perspective. The economics are extremely attractive based on current gas prices and the licence is considered
profitable at considerably lower gas prices.
As part of the planned work programme, the appraisal wells are also intended to be producer wells. Danube can use the abundance of
nearby infrastructure to readily monetise gas, thereby creating cash flow for Danube and subsequently Reabold. This cash can then be
used to target further upside on the licence on which prospective resources of 300bcf of gas and 45mmbbl of oil have been identified
by the operator. As part of the appraisal campaign, two gas discoveries, one of which has previously flowed gas to surface, will be re-
drilled.
On 19 March 2019, ADX provided an update on the Parta appraisal operations in Romania. Danube owns 100% of the Parta Exploration
Permit, in which the IM Production Licence is located, which was acquired from Amromco in October 2018. The planned Parta
appraisal programme consists of two wells, IM-1 and IM-2, with IM-1 expected to spud in late-June 2019.
Since mid-2018, Danube has been seeking to obtain all of the necessary permits and statutory approvals required to allow it to drill the
two appraisal wells, which have now all been duly received. Danube has recently selected IM-1 as the first drilling candidate for the
appraisal programme as it sits within the IM Production Licence and Danube believes it can be put into production in a relatively short
timeframe. The IM-2 well is located within Parta Exploration Permit but outside of the IM Production Licence.
The spudding of IM-1 will be later than previously planned, primarily due to Danube's preference to drill IM-1 from within the
Production Licence, which needed to be formally transferred from Amromco before the government authority could issue a drilling
permit. Furthermore, despite the acquisition of the IM Production Licence completing in October 2018, the full data set utilised for
prospect evaluation and planning for the IM Production Licence was not provided to ADX until 19 December 2018.
IM-1 is targeting multiple pay zones, including established appraisal potential from historical wells drilled in the 1980s that were tested
but never produced. IM-1 also has exploration potential defined on recently acquired 3D seismic data. An independent report prepared
by ERC Equipoise Pte Ltd (“ERCE”) in mid-2018, assessed the contingent and prospective resource potential of IM-1 of 18.8bcf on a
P50 basis. This excludes deeper exploration potential, which will be accessed by the IM-1 well. ERCE has assessed a contingent and
prospective resource, excluding the exploration potential, of 49.9bcf across IM-1 and IM-2 on a P50 basis.
Due to expected overpressure starting at around 2,400 metres (the historical well blow out reservoir), 7” casing is programmed to be
run to a depth of 2,350 metres TVD (true vertical depth). The well will then be drilled through the overpressure zone in a smaller 6
1/8” hole size and will reach TD (target depth) at around 2,500 meters.
The most likely cost estimate for the IM-1 well is currently US$3m, for which Danube is fully funded, including evaluation, logging
and running casing. This cost estimate does not include well testing operations which are planned to be undertaken with a much smaller
and lower cost work over unit. Included in the well cost estimate is a well head and production tubing, which has already been
purchased.
On 8 April 2019, Reabold was pleased to announce that a binding Heads of Agreement had been signed between Danube's wholly
owned subsidiary, ADX Energy Panonia Srl, and an Australian private company, Parta Energy Pty Ltd (the “Farminee”) to fund a
planned US$1.5m seismic programme on Danube’s Parta Exploration Licence onshore Romania. Completion of the planned US$1.5m
seismic programme will earn the Farminee a 50% interest in the Parta Exploration Licence (the "Farm-In"). Danube currently holds a
100% interest in the Licence, following the withdrawal of previous partner Rohöl-Aufsuchungs Aktiengesellschaft on 31 March 2019
and, following completion of the Farm-In, Danube will again have a 50% interest in the Parta Exploration Licence.
The Farm-In excludes the Parta Appraisal Programme Area, in which Danube has a 100% interest, and expects to drill the IM-1
appraisal well in Q2 2019, as announced on 19 March 2019. The Farminee is a company formed to undertake exploration in Romania,
with guaranteed financial support to undertake its Farm-In obligations. The agreement is conditional on finalisation of a joint operating
agreement and the extension of the Parta Exploration Licence for a further two years.
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The Farminee will fund the first US$1.5 million of expenditure, for the acquisition of approximately 100 km2 of 3D seismic to earn a
50% participating interest in the Parta Exploration Licence. ADX expects all Farm-In funding conditions to be met by the end of June
2019 and will commence planning the seismic programme during Q3 2019, with a view to seismic acquisition occurring during Q4
2019. ADX has previously acquired approximately 100km of 2D seismic and 50km2 of 3D seismic, and has licenced (with landowners)
an area of approximately 200km2 for future 3D seismic acquisition within the Parta Exploration Licence.
The Parta Exploration Licence activities are intended to provide low risk, high reward, exploration follow up drilling locations for
Danube, following on from the Parta Appraisal Programme.
On 30 May 2019, the Company announced that Danube has received all the required permits to enable the drilling of the IM-1 appraisal
well, with the construction of the well site and access road expected to be completed within 6-8 weeks, following which, the IM-1 well
will be drilled immediately.
The upper 2,350 metres of the IM-1 well will be a re-drill of the original discovery well and will evaluate multiple gas zones mapped
on 3D seismic data including a gas zone which was flow tested. The well will then be deepened by a further 200 metres to evaluate a
larger exploration target, which has been proven to contain hydrocarbons in other fields within the basin.
The IM-1 well is not only highly prospective, it also has the benefit of being close to infrastructure for gas, oil and electricity, thereby
enabling the future potential for low cost, highly profitable commercialisation. With low well costs and approvals already secured for
the second well in the appraisal campaign, we see significant value and running room in our Romanian investment and look forward
to updating the market on further news in the coming months.
It should be noted that all approvals and permits have already been secured for the Iecea Mica 2 well, the second planned well in the
Parta appraisal programme.
Gaelic
West Brentwood
On 30 August 2018, the Company was delighted to announce that Integrity, the contract operator of the Company's California
investments, had informed the Company of a commercial hydrocarbon discovery at the Venturini-Ginochio #3 ("VG-3") well within
the West Brentwood licence area. The well was safely drilled to the planned target depth of 4,600ft and was subsequently completed
as a producing well.
The well was drilled in a location up-dip of a previously-producing well on the West Brentwood field, where logging equipment
indicated the presence of good sands and significant oil and gas shows in the Second Massive target formation as well as additional
strong gas shows in shallower horizons. Halliburton wireline logging confirmed the presence of approximately 60 feet of pay, in line
with the Company’s pre-drilling targets. Surface cutting samples were taken confirming the presence of hydrocarbons. Integrity then
installed production casing and completed the well as a producer.
Given the success at VG-3, Reabold and Integrity began work on assessing the potential to add a second well at West Brentwood to
enhance value further.
On 20 September 2018, the Company was delighted to announce that Integrity had informed the Company of a successful test at the
VG-3 well, and was preparing facilities to accommodate production in excess of 200 barrels of oil per day and 60 million cubic feet of
gas per day (gross). Post the first 36 hours of testing, Integrity had accumulated over 400 barrels of oil (gross) ready for sales.
On 2 November 2018, the Company announced that following the successful drilling and testing of the VG-3 well, which delivered an
initial rate of 200 barrels of oil per day (“bopd”) and 60 thousand standard cubic feet per day (“scf/d”), Integrity had put the well into
production.
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As a result of the success of the VG-3 well, the partners took the decision to prioritise the drilling of a second well on the West
Brentwood licence as the second well in the California programme. This second well at West Brentwood was planned to be drilled by
the end of 2018, with the aim of accelerating the cash flow generated from the licence. Accordingly, Reabold decided to defer the
drilling of a well on Grizzly Island until 2019.
On 19 December 2018, the Company was pleased to announce that Integrity had commenced drilling operations at the VG-4 well
within the West Brentwood Licence area, onshore California, in which Reabold owns a 50% equity interest.
On 3 January 2019, the Company was pleased to announce that Integrity had informed the Company of a successful drilling result at
the VG-4 well. The well was drilled safely and within budget to a total depth of 4,700ft and had significant oil and gas shows in the
targeted Second Massive formation. Halliburton wireline logging confirmed the presence of pay.
Success at VG-4 is a great result, both in terms of the substantial increase in cash flow that we can generate from West Brentwood, and
in proving that we have significant running room within our California portfolio.
We continue to be impressed by the performance at West Brentwood, and we are actively considering the potential for additional wells
to further accelerate the already impressive cash flow.
On 29 April 2019, the Company announced that at the West Brentwood field, in which Reabold has earned a 50% interest, work is
underway to complete a tie into the nearby gas pipeline. This will allow the VG-4 well to produce oil at a higher rate, as well as allowing
the sale of the gas produced from the well.
Monroe Swell
Temporary has an agreement with Sunset Exploration to pay the full drilling and completion costs of two wells within its Monroe Swell
licence areas in order to earn a 50% net working interest in these licences. Additional activity beyond the initial two wells will be
funded by Reabold on a 50% working interest basis.
On 4 March 2019, the Company was pleased to announce the access road at Monroe Swell had dried out after a prolonged period of
severe weather conditions, and as a result drilling had commenced, with the Burnett 2A well spud on 2 March 2019. Similarly to VG-
3, this will test a target up-dip of a previously-producing field which has been identified on 3D seismic and has been considerably de-
risked by the recent workover campaign of four older wells at Monroe Swell.
On 11 March 2019, the Company was pleased to announce that Integrity had informed the company of a successful drilling result and
oil discovery at the Burnett 2A well in California. The well was safely drilled and within budget, despite severe weather conditions, to
a total depth of 922 metres, encountering the targeted Burnett and Lower Burnett sands. Significant oil and gas shows were seen within
these formations and Halliburton wireline logging has confirmed the presence of pay estimated in excess of 60 metres, ahead of pre-
drill expectations.
On 22 March 2019, Reabold announced the commencement of drilling operations at the Burnett 2B well within the Monroe Swell
field. The drilling of Burnett 2B follows the successful Burnett 2A well drilled on the Monroe Swell field, as announced on 11 March
2019. Following the Burnett 2A drilling results, Reabold and Integrity, made the decision to seek accelerated permitting for the Burnett
2B well, which was successful. The drilling rig was retained at Monroe Swell and was utilised for the drilling of the 2B well.
On 1 April 2019, the Company was pleased to announce that Integrity had informed the Company of a successful drilling result and
oil discovery at the Burnett 2B well in California, following on from the successful Burnett 2A well result. The well was drilled safely
and within budget, despite continued severe weather conditions, to a total depth of 894 metres, encountering the targeted Burnett and
Lower Burnett sands. Significant oil and gas shows were seen within these formations and Halliburton wireline logging has confirmed
the presence of estimated pay of 90 metres, ahead of pre-drill expectations.
Following the drilling and completion of Burnett 2A and 2B, Reabold has completed its earn-in to the Monroe Swell licence area and
has been assigned a 50% equity interest.
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Success with the Burnett 2A and 2B wells is highly encouraging. With low drilling and completion costs, short drilling times and
substantial running room, Monroe Swell can deliver substantial production growth coupled with highly attractive returns. Following
our success at West Brentwood, we are delighted to have made a significant discovery at Monroe Swell, which we have always
considered the core asset within the Company’s US portfolio. Monroe Swell is expected to be a multi-well project which can unlock
significant NPV potential.
On 29 April 2019, the Company was pleased to announce testing at the Burnett 2B well on the Monroe Swell field in California. This
was the second of the two wells drilled at Monroe Swell, and announced as a discovery on 1 April 2019. On 20 May 2019, the Company
announced that the perforating and swabbing operation at the Burnett 2B and Burnett 2A wells had been completed and commercial
flow rates have been confirmed at both wells.
Reabold has now earned its 50% working interest in the licence and all future activity will be funded by Reabold at a 50% paying
interest.
Both the Burnett 2A and 2B wells, have additional reservoir zones prognosed to be hydrocarbon bearing that have not yet been
perforated and Reabold will evaluate the potential to target additional production from these zones at a later date, after gathering initial
production data from these wells.
In addition, Reabold plans to drill further wells on this licence area, given this success, with the aim of growing production and cash
flow.
We are very pleased that all four wells drilled in the California portfolio will soon be in permanent production. Flow rates at Burnett
have been increasing throughout the testing period as the swabbing takes effect, and we look forward to seeing the sustainable flow
rates once the pumping units are in place. In the meantime, we have produced and are selling meaningful volumes out of our existing
wells, with the cash flow allowing us to continue to exploit Monroe Swell and West Brentwood to drive considerable, self-funded
growth from these assets. With VG-4 soon to be on unconstrained flow, the two Burnett wells coming into production, and the
restoration of full production at Doud A, we should see a sharp increase in production in the near term, with additional drilling to
follow.
From 20 April 2019 to 8 May 2019, with VG-4 producing at the constrained rates, cumulative gross production across Reabold's
California portfolio was 7,484boe gross (3,742boe net to Reabold). This excludes volumes produced through the testing programme
at Burnett 2A and 2B.
Rathlin
On 26 April 2018, Reabold was pleased to announce that drilling operations had commenced at the West Newton A-2 appraisal well,
onshore UK. Drilling operations have initially consisted of one well drilling into the Kirkham Abbey Formation gas discovery, de-
risking 189 bcfe Contingent Resources, before then targeting the deeper Cadeby Formation oil exploration target which has gross
Prospective Resources of 79.1mmboe.
Pre-drill estimates ascribe 72%7 chance of success and a gross NPV of US$247m8 for the Kirkham Abbey Formation discovery and a
24%7 chance of success and a gross NPV of US$850m8 for the Cadeby Formation prospect.
In a success case, West Newton offers a fast pathway to monetisation through its proximity to existing gas pipelines and infrastructure
in the local area.
Rathlin is the operator and has a 66.67% equity interest in the UK onshore licence PEDL183, which contains the West Newton A-1
discovery, drilled by Rathlin in 2014.
7 Connaught management’s estimates
8 Connaught management’s estimate (Note: this estimate is based on the economic evaluations run by Deloitte for the
CPR, updated by Connaught to reflect the most recent price forecasts provided by Deloitte).
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In 2017, Deloitte LLP prepared a CPR for Connaught Oil & Gas Limited (“Connaught”) (a 35% shareholder in Rathlin and operator
of the West Newton A-2 well) incorporating both the data from the West Newton discovery well and subsequently acquired 3D seismic
data over the field. The Deloitte CPR assigns Contingent Resource to the Kirkham Abbey gas formation and is the source of
management volumetric assessments.
In our view, West Newton is extremely attractive, due to both its scale and its location and we are delighted to have been able to fund
the appraisal well towards potentially proving up its considerable value.
On 17 June 2019, the Company was pleased to announce that the West Newton A-2 appraisal well had been successful, which confirms
Connaught’s previous assessment that West Newton could potentially be the largest UK onshore gas field, and the largest hydrocarbon
discovery onshore UK since 1973. The results of the appraisal well have exceeded our expectations and have also shown a significant
liquid hydrocarbon volume which has increased our excitement and the future value of the field materially. The deeper exploration
target in the Cadeby formation encountered hydrocarbon shows with an oil saturated core.
The data from the A-2 appraisal well is subject to further testing, which is required the determine flow rates and inform the forward
work programme. The extended well test operations are expected to commence during Q3 2019.
From its onshore location near Hull and with nearby infrastructure available, we anticipate that West Newton can provide material
volumes of hydrocarbons for the UK’s energy needs at low cost and in the near term.
Success in a project of this scale would undoubtedly be transformational for Reabold and its investors. Permitting is in place for an
extended well test planned for Q3 2019. We look forward to the well test in the coming weeks and potentially generating early cash
flow from the testing programme.
Key performance indicators
The key performance indicators (“KPIs”) are:
2018
Definition
Performance
KPI 1
Addition of a material new
venture that meets the Company’s
corporate investment criteria
KPI 2
Commercial discovery
with investment strategy
in-line
KPI 3
Fund raisings and preservation in
the Company’s cash position
• Significant number of opportunities reviewed and evaluated.
• Significant new investments in Rathlin and Gaelic.
• Multiple oil discoveries in California project.
• Discovery in the Colter South Prospect.
• Commencement of commercial production.
In March 2018, a fund raising of £7.75m at 0.6 pence.
•
•
• Significant new institutional support.
In September 2018, a fund raising of £4.83m at 0.85 pence.
Attainment
Achieved
Achieved
Achieved
KPI 4
Growth in total net assets
• The total net assets at the end of 2017 and 2018 were £5.73m
Achieved
and £19.31m respectively.
KPI 5
Growth in share price
• The closing share prices at the end of 2017 and 2018 were 0.80
pence and 0.74 pence respectively.
• On 1 August 2018, the share price achieved a high of 0.95 pence.
Partially
achieved
KPI 6
Environmental compliance
• There was environmental compliance by the Group and investee
Achieved
companies.
KPI 7
Retention of key management
and strengthening Board
• The key executives were retained and further incentivised. New
independent directors broadening expertise of the Board.
Achieved
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Principal Risks and Uncertainties
The Company continuously monitors its risk exposures and reports to the board of directors (the “Board”) on a regular basis. The
Board reviews these risks and focuses on ensuring effective systems of internal financial and non-financial controls are in place and
maintained.
Risk
Strategic risks
Political risk: changes in government
policies in the jurisdictions in which
Reabold’s subsidiaries and investee
companies operate, could have an
adverse impact on the implementation of
the Group’s strategy.
Operational risks
Exploration risk: Reabold’s
subsidiaries and investee companies fail
to locate and explore hydrocarbon
bearing prospects that have the potential
to deliver commercially.
Permitting Risk: planning,
environmental, licensing and other
permitting risks associated with
Reabold’s subsidiaries and investee
companies’ operations particularly with
exploration drilling operations.
Financial risks
Liquidity Risk: insufficient liquidity and
funding capacity of the Group and
investee companies could adversely
impact the implementation of the
Group’s strategy and restrict work
programmes due to lack of capital.
Market Risk: uncertainty and volatility
of commodity prices could adversely
impact on expected future revenues,
margins, cash flows and returns.
Mitigation
Magnitude & Likelihood
The Group monitors political
developments in the various jurisdictions
in which it operates, in-conjunction with
its partners and through industry
associations.
Magnitude – High
Likelihood – Medium
Magnitude – High
Likelihood – High
Magnitude – High
Likelihood – Medium
Magnitude – High
Likelihood – Medium
Magnitude – Medium
Likelihood – Medium
Analysis of available technical
information to determine work
programme. Risk sharing arrangements
entered into to reduce downside risk.
Reabold’s subsidiaries and investee
companies have to date been successful
in obtaining the required permits to
operate. Therefore, Reabold considers
that such risks are partially mitigated
through compliance with regulations,
proactive engagement with regulators,
communities and the expertise and
experience of the management teams.
The Board regularly reviews the Group’s
cash flow forecasts and the availability
or adequacy of its current facilities to
meet the Group’s cash flow
requirements. The Company actively
monitors the liquidity position of its
investee companies.
Contingency built into evaluation,
planning and budgeting process to allow
for the downside movements in
commodity prices. The Group may
consider it appropriate in the future to
hedge a proportion of its production,
particularly if the Group is reliant on the
production to service debt.
Reabold Resources Plc Report & Accounts
19
REABOLD RESOURCES PLC
Strategic Report
_______________________________________________________________________________________
Financial Review
The Group loss for the 12 months ended 31 December 2018 was £1,949,000 (2017: loss of £1,152,000).
During the reporting period, the Group successfully commenced production from its California assets, generating revenues of £194,000
(2017: Nil) and gross profit of £111,000 (2017: Nil).
Total administration costs increased from £443,000 for the year ended 31 December 2017 to £939,000 for the year ended 31 December
2018, mainly driven by an increase in executive remuneration, legal fees, broker and investor relations fees, reflecting the significant
increase in investment and market activities. The increase in the Group loss for the reporting period also reflected the increase in share
based payments expense of £995,000 (2017: £559,000), reflecting the further performance based incentivisation of executives.
For the year ended 31 December 2018, the Group net cash outflow from operating activities prior to movements in working capital
was £940,000 (2017: cash outflow of £449,000), reflecting the increase in administration expenses, as outlined above. The cash outflow
from investing activities increased considerably from £494,000 for the year ending 31 December 2017 to £9,348,000 for the year ended
31 December 2018, reflecting the significant increase in investment activities during the reporting period, including the investments in
Corallian, Danube and Rathlin, and the funding of activities in California.
The Group raised £11,909,000 (net of costs) during the reporting period (2017: £5,816,000). Cash and cash equivalents as at 31
December 2018 was £7,112,000 (2017: £5,307,000).
The Group total net assets and net current assets as at 31 December 2018 were £19,313,000 (2017: £5,732,000) and £7,073,000 (2017:
£5,182,000) respectively.
Brexit
The Board continues to monitor the terms of the withdrawal of the United Kingdom from the European Union, which have not yet
been finalised and accordingly the final impact of which on the Group is currently uncertain.
Outlook
We are highly encouraged by the success we have had so far in the implementation of our strategy to invest in low-risk, high impact,
upstream oil and gas projects. With a portfolio that contains interests in the Danube, Corallian and Rathlin prospects, all of which had
appraisal campaign drilling in 2019, and the further drilling programmes in California following the success in the US to date, together
with a number of other projects currently under review, the Board is confident that its shareholders can look forward to an exciting
2019 and beyond.
Sachin Oza and Stephen Williams
Co-Chief Executive Officers
26 June 2019
Reabold Resources Plc Report & Accounts
20
REABOLD RESOURCES PLC
Board of Directors
_______________________________________________________________________________________
Jeremy Edelman – Non-Executive Chairman
Jeremy Edelman holds Bachelor degrees in Commerce and Law together with a Masters degree in Applied Finance. Jeremy is admitted
as a solicitor to the Supreme Courts of Western Australia and New South Wales. Jeremy subsequently worked for some of the world's
leading investment banks, including Bankers Trust and UBS Warburg in debt and acquisition finance. He has held consulting and
director positions in listed companies in the UK and Australia, such as Mt Grace Resources NL, with a focus on resource exploration
and development, including investment companies established with the specific objective of investing in resources projects. He also
has corporate finance experience, having been responsible for co-coordinating a number of companies in making acquisitions in a
variety of resource sectors, including oil and gas, uranium, molybdenum, base metals and coal. He has worked in various regions of
the world, including the Republic of Kazakhstan, Russia, South Africa and Australia. Jeremy served as a Non-Executive Director of
Leni Gas Cuba Limited until 12 July 2016, a Director of Altona Energy Plc (also known as Altona Resources Plc) until 4 July 2006,
Executive Director of Leni Gas & Oil PLC from August 2006 to December 2010 and Director of Braemore Resources Plc until 27 July
2005.
Sachin Oza – Executive Director and Co-Chief Executive
Sachin Oza has 17 years’ investment experience, including 14 years’ covering the energy sector. He joined Guinness Asset
Management in April 2016, having previously worked as an investment analyst at M&G Investments for 13 years, where he covered
the Utility, Transport, Mining and Oil & Gas sectors on a global basis. Sachin has also held investment analyst roles at Tokyo Mitsubishi
Asset Management and JP Morgan Asset Management.
Stephen Williams – Executive Director and Co-Chief Executive
Stephen Williams has 15 years’ experience in the energy sector. He joined Guinness Asset Management in April 2016, having
previously worked as an investment analyst at M&G between 2010 and 2016, where he focussed on energy and resources. Prior to this,
Stephen worked as an energy investment analyst for Simmons & Company International between 2005 and 2010 and from 2003 to
2005 he worked as an analyst at ExxonMobil.
Marcos Mozetic – Non-Executive Director
Marcos Mozetic, an exploration geologist, brings over 41 years of international technical experience in the oil and gas industry to the
Company. His most recent experience was in designing, implementing and leading Repsol S.A’s exploration strategy between 2004
and 2016. During this period, Repsol become a leader in reserve replacement and participated in some of the most exciting discoveries
worldwide. Previous to this, Marcos worked as a development geologist in 1975 with Bridas, before moving into the exploration
department, which he later led. Following this, Marcos worked for BHP Petroleum and BHP Minerals as Chief Geologist for Argentina
and later Country Leader. Marcos holds a BSc and Post-Graduate degree in Petroleum Geology from the University of Buenos Aires.
Mike Felton – Non-Executive Director
Mike Felton is an experienced fund manager in the City and brings over 29 years of financial expertise to the Company. Mike
previously served as Head of UK Retail Equities at M&G Investments and was Manager of the M&G UK Select Fund, growing the
fund's assets from £110m to circa £550m at its peak. Mike has also previously served as Joint Head of Equities at ISIS Asset
Management and Manager of ISIS UK Prime Fund, as well as Chief Investment Officer at Lumin Wealth, a position he still retains
part-time. Mr Felton sits on the International Tennis Federation's Investment Advisory Panel and is a Business Ambassador for
Anthony Nolan, the UK's blood cancer charity and bone marrow register.
Anthony Samaha – Executive Director
Anthony Samaha is a Chartered Accountant who has over 20 years' experience in accounting and corporate finance, including resources
development. Anthony worked for over 10 years with international accounting firms, including Ernst & Young, principally in corporate
finance, gaining significant experience in valuations, IPOs, independent expert reports, and mergers and acquisitions. He has extensive
experience in the listing and management of AIM and TSX quoted companies, including fund raisings, project development and
mergers and acquisitions. Anthony has been involved in acquisitions and resource projects in various regions of the world, including
Australia, South Africa, West Africa, North America, Kazakhstan and the People's Republic of China. He holds Bachelor of Commerce
and Bachelor of Economics degrees from the University of Western Australia, and is an Associate of the Chartered Accountants
Australia and New Zealand and an Associate of the Financial Services Institute of Australasia.
Reabold Resources Plc Report & Accounts
21
REABOLD RESOURCES PLC
Directors’ report for the year ended 31 December 2018
_______________________________________________________________________________________
The Directors submit their report and the audited financial statements of the Company for the year ended 31 December 2018.
Principal activities
The principal activity of the Company is investment in pre-cash flow upstream oil and gas projects, primarily as significant minority
interests in unlisted oil & gas companies or majority interests in unlisted oil & gas companies with non-operating positions on licences.
Results and dividends
The results of the Group are shown on page 37. No dividends were declared or paid in the year (2017: £nil). The Directors do not
recommend the payment of a final dividend. The Directors are satisfied with the performance of the Company in the year.
Post balance sheet events
Details of post reporting date events are disclosed in Note 28 of the financial statements.
Financial Risk Management
The Group’s activities expose it to foreign currency, credit and liquidity risks. The size of the Company means that it is unnecessary
and impractical for the Directors to delegate the responsibility of monitoring financial risk management to a sub-committee of the
Board. Refer to Note 27 of the financial statements, for further details.
Directors and their interests
The names of the Directors who held office during the year and their shareholdings are shown below.
Director
Jeremy Edelman *
Sachin Oza
Stephen Williams
Marcos Mozetic
Michael Felton
Anthony Samaha
At 31 December 2018
169,000,000
10,000,000
10,000,000
-
2,808,676
-
At 1 January 2018
169,000,000
10,000,000
10,000,000
-
-
-
* including 144,000,000 shares held by Saltwind Enterprises Ltd, a company connected with Jeremy Edelman.
The total options held by directors as at 31 December 2018 was 315,000,000. Sachin Oza and Stephen Williams each held 150,000,000
options and Anthony Samaha held 15,000,000 options. The options have a weighted average exercise price of 0.8 pence and a weighted
average life of 3.0 years.
Directors’ indemnity
The Company maintains a directors’ and officers’ liability policy on normal commercial terms which includes third party indemnity
provisions.
Going concern
The financial statements have been prepared on the going concern basis. The Directors have prepared cash flow forecasts for the period
ending 30 June 2020 which take account of the current cost and operational structure of the Group and investment agreements.
These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for a period of at least
twelve months from the date of approval of these financial statements. Accordingly, the financial statements have been prepared on a
going concern basis.
Outlook and future developments
Future developments are outlined in the Chairman’s Statement and Strategic Report.
Brexit
As noted in the Strategic Report, the Board continues to monitor the terms of the withdrawal of the United Kingdom from the European
Union, which have not yet been finalised and accordingly the final impact of which on the Group is currently uncertain. However, the
ongoing uncertainty around Brexit is impacting on exchange rates and financial market sentiment, which could negatively impact on
the cost of procuring foreign currencies and the raising of further capital on terms acceptable to the Group.
Political and charitable contributions
The Company made no contributions to charitable or political bodies during the year (2017: £Nil).
Reabold Resources Plc Report & Accounts 22
REABOLD RESOURCES PLC
Directors’ report for the year ended 31 December 2018
_______________________________________________________________________________________
Substantial shareholders
As at 25 June 2019, the Company had been notified of the following substantial shareholdings in the ordinary share capital:
Holder
Miton Asset Management
M&G Investment Management
J Safra Sarasin
JO Hambro Capital Management
UBS Wealth Management (UK)
Ruffer LLP
Saltwind Enterprises Ltd & J Edelman
No. of shares
357,254,901
352,941,176
250,000,000
245,000,000
213,333,333
157,124,257
169,000,000
%
9.35%
9.23%
6.54%
6.41%
5.58%
4.11%
4.42%
Corporate governance
The Board is committed to ensuring good standards of corporate governance in so far as practicable for a company of this size. The
London Stock Exchange has required all AIM companies to apply a recognised corporate governance code from 28 September 2018.
In connection with the introduction of these new requirements, the Quoted Companies Alliance has published a new Corporate
Governance Code which the Company has adopted from 28 September 2018. The Company has adopted and operates a share dealing
code for Directors and senior employees on substantially the same terms as the Model Code appended to the Listing Rules of the UK
Listing Authority. Information in relation to the Corporate Governance of the Group is contained within the Corporate Governance
Report.
Employment policies and remuneration
The Company is committed to promoting policies which ensure that high calibre employees are attracted, retained and motivated, to
ensure ongoing success for the business. Employees and those who seek to work with the Company are to be treated equally regardless
of sex, marital status, creed, age, colour, race or ethnic origin.
The Company remunerates the Directors at a level commensurate with the size of the Company and the experience of its Directors.
The Board has reviewed the Directors’ remuneration and believes it upholds the objectives of the Company with regard to this issue.
Details of Directors’ emoluments and payments made for professional services rendered are set out in Note 9 to the financial statements.
Environmental policies
The Group’s operations are, and will be, subject to environmental regulation (with regular environmental impact assessments and
evaluation of operations required before any permits are granted to the Group) in the jurisdiction in which it operates. Although the
Group intends to be in compliance with all applicable environmental laws and regulations, there are certain risks inherent to its
activities, such as accidental spills, leakages or other circumstances, that could subject the Group to extensive liability. Further, the
Group may fail to obtain the required approval from the relevant authorities necessary for it to undertake activities which are likely to
impact the environment. The Group is unable to predict the effect of additional environmental laws and regulations which may be
adopted in the future, including whether any such laws or regulations would materially increase the Group’s cost of doing business or
affect its operations in any area. No environmental breaches have been notified by any governmental agency as at the date of this
report.
Board of Directors
The Board meets regularly to determine the policy and business strategy of the Company and has adopted a schedule of those matters
that are reserved as the responsibility of the Board. The Directors who held office during the year and up to the date of this report are
given below:
(Non-Executive Chairman)
Jeremy Edelman
(Executive Director and Co-CEO)
Sachin Oza
Stephen Williams (Executive Director and Co-CEO)
Anthony Samaha
Marcos Mozetic
Michael Felton
(Executive Director)
(Non-Executive Director) (appointed 17 September 2018)
(Non-Executive Director) (appointed 17 September 2018)
Board committees
The Board has implemented an Audit Committee and Remuneration Committee in the 2018 financial year.
Reabold Resources Plc Report & Accounts 23
REABOLD RESOURCES PLC
Directors’ report for the year ended 31 December 2018
_______________________________________________________________________________________
Corporate and social responsibility
The Company maintains high, ethical standards in its business activities. We act responsibly, promoting accountability as individuals
and as a company. We operate with ethics and fairness and comply with all required rules and regulations.
The Company requires that in respect to any of its investee’s exploration and development, there runs alongside this a comprehensive
community engagement plan. It is vital that our investee companies engage, listen and communicate effectively with local communities,
particularly when they begin the process of planning new developments. Whilst the Company is cognisant of its corporate social
responsibilities, the Company considers that it is not of the size to warrant a formal policy as the issues that are relevant to this policy
are mostly the responsibility of the operators of the wells with which the Company has agreements.
Controlling party
In the opinion of the Directors there is no controlling party.
Statement of disclosure to auditor
So far as the Directors are aware, there is no relevant audit information of which the Company’s auditor is unaware, and they have
taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and
to establish that the Company’s auditor is aware of that information.
Matters covered in the Strategic Report
As permitted by Paragraph 1A of schedule 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 certain matters which are required to be disclosed in the Directors’ report have been omitted as they are included in
the Strategic Report instead. These matters relate to the Business review, principal risks and uncertainties, key performance indicators
and future developments (outlook).
Bribery Act
The Company is cognisant of its responsibilities under the Bribery Act and has implemented an Anti-Bribery policy.
UK City Code on Takeovers and Mergers
The Company is subject to the UK City Code on Takeovers and Mergers.
Market Abuse Regime
The Company has adopted and operates a share dealing code for Directors and senior employees on substantially the same terms as the
Model Code and MAR appended to the Listing Rules of the UKLA.
Auditor
In accordance with section 489 of the Companies Act 2006, a resolution to reappoint Mazars LLP was put to the Annual General
Meeting held on 11 December 2018 and was approved. The auditor, Mazars LLP, will be proposed for reappointment in accordance
with Section 485 of the Companies Act 2006. Mazars LLP has signified its willingness to continue in office as auditor.
Annual General Meeting
Notice of the forthcoming Annual General Meeting will be enclosed separately.
By order of the Board, 26 June 2019
A Samaha
Registered Office:
20 Primrose Street
London
EC2A 2EW
Reabold Resources Plc Report & Accounts 24
REABOLD RESOURCES PLC
Corporate Governance Report
_______________________________________________________________________________________
The London Stock Exchange required that all AIM companies apply a recognised corporate governance code from the 28 September
2018. In connection with the introduction of these new requirements, the Quoted Companies Alliance has published a new corporate
governance code.
The Directors of the Company have formally taken the decision to apply the Quoted Companies Alliance Corporate Governance Code
(the “QCA Code”) from 28 September 2018. The Board recognises the principles of the QCA Code, which focus on the creation of
medium to long-term value for shareholders without stifling the entrepreneurial spirit in which small to medium sized companies, such
as Reabold, have been created. The Company sets out below its annual update on its compliance with the QCA Code.
The QCA Code sets out 10 principles that should be applied. These are listed below together with a short explanation of how the
Company applies each of the principles:
1)
Principle One: Establish a strategy and business model which promote long-term value for shareholders
The Board has concluded that the highest medium and long term value can be delivered to its shareholders by the adoption of a single
strategy for the Company.
The investing policy of the Company is to acquire direct and indirect interests in exploration and producing projects and assets in the
natural resources sector, and consideration is given to investment opportunities globally. However, under that policy, the Board is
focused on investments in pre-cash flow upstream oil and gas projects. Those projects are primarily in the form of significant minority
interests in unlisted oil & gas companies or majority interests in unlisted oil & gas companies with non operating positions on licences
that are on-shore or near-shore assets with low-cost drilling opportunities that can provide medium term production and hence cash
flow.
The Company is an investor in upstream oil & gas projects globally with an aim to create value from each project by investing in
undervalued, low-risk, near-term upstream oil & gas projects and by identifying realistic potential exit plans prior to investment.
The Company’s long term strategy is to re-invest capital made through its investments into larger projects in order to grow the
Company. The Company aims to gain exposure to assets with limited downside and high potential upside, capitalising on the value
created between the entry stage and exit point of its projects. The Company invests in projects that have limited correlation to the oil
price.
The Company only invests in projects which meet its stringent requirements.
The Company may be both an active and a passive investor depending on the nature of the individual investments.
Although the Company intends to be a medium to long-term investor, the Company will place no minimum or maximum limit on the
length of time that any investment may be held and therefore shorter term disposal of any investments cannot be ruled out. The
Company intends there to be no limit on the number of projects into which the Company may invest, and the Company’s financial
resources may be invested in a number of propositions or in just one investment, which may be deemed to be a reverse takeover
pursuant to Rule 14 of the AIM Rules. The investing policy will allow investments to be in all types of assets and there will be no
investment restrictions.
The Company may offer new Ordinary Shares by way of consideration as well as cash, thereby helping to preserve the Company’s
cash resources for working capital. The Company may, in appropriate circumstances, issue debt securities or otherwise borrow money
to complete an investment. The Company does not intend to acquire any cross-holdings in other corporate entities that have an interest
in the Ordinary Shares.
The Company provides shareholders with a discussion of corporate strategy within this Annual Report, specifically the Chairman’s
Statement and the Strategic Report sections. Key business challenges and how they may be mitigated are detailed in the Strategic
Report.
2)
Principle Two: Seek to understand and meet shareholder needs and expectations
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company
has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss
issues and provide feedback at meetings with the Company.
All shareholders are encouraged to attend the Company’s Annual General Meeting and any general meetings held by the Company.
Investors also have access to current information on the Company through its website, www.reabold.com, and through Sachin Oza and
Stephen Williams, the Co-Chief Executive Directors, who are available to answer investor relations enquiries. The Company
disseminates all regulatory updates via a Regulatory Information Service before doing so elsewhere.
Reabold Resources Plc Report & Accounts 25
REABOLD RESOURCES PLC
Corporate Governance Report
_______________________________________________________________________________________
3)
Principle Three: Take into account wider stakeholder and social responsibilities and their implications for long-term
success
The Board recognises that the long term success of the Company is reliant upon the efforts of the employees of the Company and its
contractors, suppliers, regulators and other stakeholders. The Board has put in place a range of processes and systems to ensure that
there is close oversight and contact with its key resources and relationships. The Company has close ongoing relationships with a
broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company.
4)
Principle Four: Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The Board ensures that procedures are in place and such procedures are being implemented effectively to identify, evaluate and manage
the significant risks faced by the Company. The risk assessment matrix below sets out those risks, and identifies their ownership and
the controls that are in place. This matrix is updated as changes arise in the nature of risks or the controls that are implemented to
mitigate them. The Board reviews the risk matrix and the effectiveness of scenario testing on a regular basis. The following principal
risks and controls to mitigate them, have been identified:
Activity
Risk
Impact
Control(s)
Management
Recruitment and retention
of key staff
Reduction in operating
capability
Stimulating and safe working
environment
Balancing salary with longer term
incentive plans
Regulatory adherence
Breach of rules
Censure or withdrawal of
authorisation
Strong compliance regime instilled
at all levels of the Company
Strategic
Damage to reputation
Inability to secure new
capital or clients
Effective communications with
shareholders coupled with
consistent messaging to our
customers
Inadequate disaster
recovery procedures
Loss of key operational and
financial data
Robust compliance
Secure off-site storage of data
Financial
Liquidity, market and credit
risk
Inability to continue as
going concern
Robust capital management
policies and procedures
Inappropriate controls and
accounting policies
Reduction in asset values
Incorrect reporting of assets
Appropriate authority and
investment levels as set by
treasury and investment policies
The Board has established procedures, as represented by this statement, for the purpose of providing a system of internal control. An
internal audit function is not considered necessary or practical due to the size of the Company and the close day to day control exercised
by the executive directors. However, the Board will continue to monitor the need for an internal audit function. The Board has
established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems.
Key business challenges and how they may be mitigated are detailed in the Strategic Report.
Reabold Resources Plc Report & Accounts 26
REABOLD RESOURCES PLC
Corporate Governance Report
_______________________________________________________________________________________
5)
Principle Five: Maintain the board as a well-functioning, balanced team led by the chair
As at the date of publication, the Board comprised of Jeremy Edelman as the Non-Executive Chairman, Marcos Mozetic and Michael
Felton as Non-Executive Directors and Sachin Oza and Stephen Williams, the Co-Chief Executive Directors, and Anthony Samaha as
Executive Director. Biographical details of the current Directors are set out on page 20 of this Annual Report.
The Executive and Non-Executive Directors are subject to re-election at the second annual general meeting of the Company after their
last appointment or reappointment, if not before.
The Co-Chief Executive Officers are considered to be full time employees. The Non-Executive Directors are considered to be part
time but are expected to provide as much time to the Company as is required.
The Board elects a Chairman to chair every meeting. The Board meets at least six times per annum. The Board has agreed that
appointments to the Board are made by the Board as a whole and so has not yet created a Nominations Committee.
The Non-executive Directors, Michael Felton and Marcos Mozetic are considered to be Independent Directors. The Board notes that
the QCA recommends a balance between executive and non-executive Directors and recommends that there be two independent non-
executives. The Board will review further appointments as scale and complexity grows.
The role of the Chairman is to provide leadership of the Board and ensure its effectiveness on all aspects of its remit to maintain control
of the Company. In addition, the Chairman is responsible for the implementation and practice of sound corporate governance. The
Chairman is considered to have adequate separation from the day-to-day running of the Company.
Attendance at Board and Committee Meetings
In order to be efficient, the Board meets formally and informally both in person and by telephone. To date there have been at least
bimonthly meetings of the Board, and the volume and frequency of such meetings is expected to continue at least at this rate. The
Company had 12 Board meetings during the year and reports below on the number of Board and committee meetings attended by
Directors.
Jeremy Edelman
Sachin Oza
Stephen Williams
Anthony Samaha
Marcos Mozetic *
Michael Felton *
Board
Audit
Committee
Remuneration
Committee
5
12
11
11
2
2
1
-
-
-
-
1
1
-
-
-
1
1
* Marcos Mozetic and Michael Felton were appointed directors of the Company on 17 September 2018.
6)
Principle Six: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The Board currently consists of six Directors. In addition to holding office as an Executive Director, Anthony Samaha also currently
holds the office of Company Secretary. The Company believes that the current balance of skills in the Board as a whole, reflects a very
broad range of commercial and professional skills across geographies and industry sectors.
The Board recognises that it currently has a limited diversity, including a lack of gender balance, and this will form a part of any future
recruitment consideration if the Board concludes that replacement or additional directors are required.
The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or
informal. The Company Secretary supports the Chairman and Executives in addressing the training and development needs of
Directors, and their membership of appropriate professional and industry associations. These professional associations have ongoing
professional development requirements, which the Company supports.
The Board during the reporting period consulted with its legal advisors and nominated advisor on specific matters in respect of the
application of QCA Code and the AIM Rules.
Reabold Resources Plc Report & Accounts 27
REABOLD RESOURCES PLC
Corporate Governance Report
_______________________________________________________________________________________
7)
Principle Seven: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
Internal evaluation of the Board and individual Directors is undertaken on an annual basis in the form of peer appraisal and discussions
to determine the effectiveness and performance in various applicable areas to their role as well as the Directors' continued independence.
The results and recommendations that come out of the appraisals for the Directors shall identify the key corporate and financial targets
that are relevant to each Director and their personal targets in terms of career development and training. Progress against previous
targets shall also be assessed where relevant.
Following a review by the Board of the positive performance of the Executive Directors in implementing the business strategy and
raising of further significant capital, the Board implemented additional performance-based equity incentives to the Executive Directors
through the issue to them of additional options.
During the reporting period, the Board undertook a performance evaluation of the Executive Directors, and in view of the overall
positive progress against KPIs and the significant increase in investment activities, the remuneration of the Executive Directors was
increased within market remuneration ranges for comparable companies.
The Board performance evaluation is to be undertaken annually, and includes an assessment of achievement of KPIs by Executive
Directors. Given the Company adopted its current strategic direction of focusing on investment in pre-cash flow upstream oil and gas
projects under a new Executive team in the fourth quarter of 2017, the performance evaluation process in the reporting period is
significantly evolved from previous years. Going forward the Remuneration Committee will undertake a review of the remuneration
of Executive Directors at least annually and may consult with external consultants to assist in the evaluation and determination of
appropriate compensation and incentivisation schemes to ensure the Company remains competitive in retaining management.
The Board is to consider periodically a succession plan. Executive directors are to have sufficient length of notice periods to ensure
the appointment of new personnel and ensure sufficient time to handover responsibilities.
8)
Principle Eight: Promote a corporate culture that is based on ethical values and behaviours
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and
that this will impact the performance of the Company.
The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the
way that employees behave. The corporate governance arrangements that the Board has adopted are designed to ensure that the
Company delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations
for the Company in a manner that encourages open dialogue with the Board. A large part of the Company’s activities is centred upon
what needs to be an open and respectful dialogue with employees, clients and other stakeholders. Therefore, the importance of sound
ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places
great import on this aspect of corporate life and seeks to ensure that this flows through all that the Company does.
The Board consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling
positive and constructive challenge. The Company has adopted, with effect from the date on which its shares were admitted to AIM,
a code for Directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded on AIM and
is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016, and which is a major part of
how the Company determine that ethical values and behaviours are recognised and respected.
9)
Principle Nine: Maintain governance structures and processes that are fit for purpose and support good decision-
making by the board
Ultimate authority for all aspects of the Company’s activities rests with the Board with the respective responsibilities of the Chairman
and the Executive Directors arising as a consequence of delegation by the Board. The Board has adopted appropriate delegations of
authority which set out matters which are reserved to the Board. The Chairman is responsible for the effectiveness of the Board, while
management of the Company’s business and primary contact with shareholders has been delegated by the Board to the Co-Chief
Executive Directors.
The Board has adopted guidelines for the appointment of Non-Executive Directors which have been in place and which have been
observed throughout the year. These provide for the orderly and constructive succession and rotation of the Chairman and non-
executive directors.
In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the success
of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence; a duty to avoid
conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a proposed transaction or
arrangement.
Reabold Resources Plc Report & Accounts 28
REABOLD RESOURCES PLC
Corporate Governance Report
_______________________________________________________________________________________
The role of the Chairman is to provide leadership of the Board and ensure its effectiveness on all aspects of its remit to maintain control
of the Company. In addition, the Chairman is responsible for the implementation and practice of sound corporate governance. The
Chairman is considered to have adequate separation from the day-to-day running of the Company.
The Corporate Governance Report provides details of the Company’s governance structures, the roles and responsibilities of directors,
details of the Audit Committee and the Remuneration Committee.
The Board has implemented an Audit committee comprising Michael Felton (Chair) and Jeremy Edelman, with Anthony Samaha an
attendee. The principal duties and responsibilities of the Audit Committee include:
• overseeing the Group’s financial reporting disclosure process; this includes the choice of appropriate accounting policies;
• monitoring the Group’s internal financial controls and assess their adequacy;
•
• annually assessing the auditor’s independence and objectivity; and
• making recommendations in relation to the appointment, re-appointment and removal of the Company’s external auditor.
reviewing key estimates, judgements and assumptions applied by management in preparing published financial statements;
The Board has implemented a Remuneration committee comprising Marcos Mozetic (Chair), Jeremy Edelman, and Michael Felton.
The principal duties and responsibilities of the Remuneration Committee include:
setting the remuneration policy for all Executive Directors;
recommending and monitoring the level and structure of remuneration for senior management;
•
•
• approving the design of, and determining targets for, performance related pay schemes operated by the Company and approve
the total annual payments made under such schemes; and
reviewing the design of all share incentive plans for approval by the Board and shareholders.
•
The Board will implement a Nomination committee at the appropriate time in line with changes to the structure, size and composition
of the Board.
The Board of Directors is responsible for the success of the Group, but given the size and complexity of its operations the day-to-day
operations of the Group are managed on a delegated basis by the Executive Directors. The schedule of matters reserved for the Board
include:
• approval of the Group’s strategic plan, oversight of the Group’s operations and review of performance in the view of the
Group’s strategy, objectives, business plans and budgets, and ensuring that any necessary corrective action is taken;
• ultimate oversight of risk, including determining the Group’s risk profile and risk appetite;
• culture and succession planning;
•
•
investments, acquisitions, divestments and other transactions outside delegated limits;
financial reporting and controls, including approval of the half-year interim results, full-year results, approval of the Annual
Report and Financial Statements, approval of any significant changes in accounting policies or practices and ensuring
maintenance of appropriate internal control and risk management systems;
• ensuring the Annual Report and Financial Statements present a fair, balanced and understandable assessment of the Group’s
position and prospects;
• assessment of the Group’s ability to continue as a going concern;
• capital expenditure, including the annual approval of the capital expenditure budgets and any material changes to them in line
with the Group-wide policy on capital expenditure;
• dividend policy, including the annual review of the dividend policy and recommendation and declaration of any dividend;
• appointment of Directors;
•
shareholder documentation, including approval of resolutions and corresponding documentation to be put to shareholders and
approval of all material press releases concerning matters decided by the Board;
terms of reference of Board committees and appointment of members to the committees; and
•
• key business policies, including approval of remuneration policies.
The Board considers its current governance structures and processes to be in line and appropriate for its current size and complexity,
as well as its current capacity, appetite and tolerance for risk. The Board will continue to monitor the appropriateness of its governance
structures and processed towards their evolution over time in parallel with the Group’s objectives, strategy and business model to
reflect the development of the Group.
Reabold Resources Plc Report & Accounts 29
REABOLD RESOURCES PLC
Corporate Governance Report
_______________________________________________________________________________________
10)
Principle Ten: Communicate how the company is governed and is performing by maintaining a dialogue with shareholders
and other relevant stakeholders
The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. The Company
has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss
issues and provide feedback at meetings with the Company.
All shareholders are encouraged to attend the Company's Annual General Meeting and any general meetings held by the Company.
Historical annual reports and other governance related material, including notices of all general meetings of the Company over the last
five years are available through the Company’s website, www.reabold.com.
Investors also have access to current information on the Company through its website, www.reabold.com, and through Sachin Oza and
Stephen Williams, the Co-Chief Executive Directors, who are available to answer investor relations enquiries.
At the time of adoption of the QCA Code from 28 September 2018, the Company established an Audit Committee and Remuneration
Committee.
Audit Committee Report
During the reporting period, the Audit Committee met once, following its establishment in September 2018, and confirmed:
•
•
•
•
•
•
•
the Audit Committee’s terms of reference outlined in this Corporate Governance Report;
the composition of the Audit Committee;
the proposed schedule for meetings of the Audit Committee in line with the Company’s financial reporting timetable;
the policy on the external auditor’s independence and provision of non-audit services, whereby they may provide tax
compliance and advice, where it is best suited;
the policy to annually review whether it is appropriate to put the audit out to tender;
the process to procure, review and agree the Audit Strategy Memorandum with the external auditor; and
the establishment of an internal audit function was not practicable in view of the current size of the Company and the Group.
Remuneration Committee Report
During the reporting period, the Remuneration Committee met once, following its establishment in September 2018, and confirmed:
•
•
•
•
•
•
the Remuneration Committee’s terms of reference outlined in this Corporate Governance Report;
the composition of the Remuneration Committee;
the proposed schedule for meetings of the Remuneration Committee in line with the Company’s annual review of Executive
Directors;
the members of the Remuneration Committee commit to reviewing and, where necessary, developing the necessary skills
and knowledge for the effective function of the committee;
the Remuneration Committee will consider the view of shareholders when setting executive pay; and
the Remuneration Committee will periodically review the need to engage external consultants to assist in the evaluation and
determination of appropriate compensative and incentivisation schemes to ensure the Company remains competitive in
retaining management.
Jeremy Edelman
Chairman
26 June 2019
Reabold Resources Plc Report & Accounts 30
REABOLD RESOURCES PLC
Statement of Directors’ responsibilities
_______________________________________________________________________________________
The Directors are responsible for preparing the Strategic report, the Directors’ report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected
to prepare financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European
Union and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing
these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether IFRS as adopted by the European Union have been followed, subject to any material departures disclosed and
explained in the financial statements;
• provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand
the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Reabold Resources Plc Report & Accounts
31
REABOLD RESOURCES PLC
Independent auditor’s report to the members of Reabold Resources Plc
_______________________________________________________________________________________
Opinion
We have audited the financial statements of Reabold Resources Plc (the “Parent Company”) and its subsidiaries (the “Group”) for the
year ended 31 December 2018 which comprise the Group Statement of Comprehensive Income, the Group Statement of Financial
Position, the Company Statement of Financial Position, the Group Statement of Cash Flows, the Company Statement of Cash Flows,
the Group Statement of Changes in Equity, the Company Statement of Changes in Equity and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent
Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31
December 2018 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard, as applied to SME listed entities and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
The impact of uncertainties due to United Kingdom exiting the European Union on our audit
The Directors’ view on the impact of Brexit is disclosed on page 20.
The terms on which the United Kingdom may withdraw from the European Union are not clear, and it is therefore not currently possible
to evaluate all the potential implications to the Group’s and the Parent Company’s trade, customers, suppliers and the wider economy.
We considered the impact of Brexit on the Group and the Parent Company as part of our audit procedures, applying a standard firm
wide approach in response to the uncertainty associated with the Group’s and the Parent Company’s future prospects and performance.
However, no audit should be expected to predict the unknowable factors or all possible implications for the Group and the Parent
Company and this is particularly the case in relation to Brexit.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate;
or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Reabold Resources Plc Report & Accounts
32
REABOLD RESOURCES PLC
Independent auditor’s report to the members of Reabold Resources Plc
_______________________________________________________________________________________
Area of focus
How our audit addressed the area of focus
Accounting for investments
The Group continued to acquire investments in
oil & gas companies in the year, therefore is
required to assess whether it meets the definition
of an investment entity under IFRS 10, which
would require all investments to be accounted
for in accordance with IFRS 9.
Management is required to apply significant
level of judgement in determining whether the
company qualifies as an investment entity.
Therefore, there is a risk that the level of control
or significant
identified
appropriately and as a result investments are not
accounted for in line with applicable accounting
standards
financial
statements.
consolidated
influence
is not
the
in
Our procedures included but were not limited to the following:
• obtaining management’s assessment as to whether Reabold
meets the definition of investment company. This was assessed
by reference to IFRS 10, paragraph 27; and
• obtaining and reviewing management’s assessment of the
control or significant influence exercised over each respective
investment. We assessed the evaluation made to ensure that
each
the
consolidated financial statements.
is accounted for appropriately
investment
in
On the basis of our audit procedures, we are satisfied that Reabold does
not meet the definition of an investment entity under IFRS 10 and that
all investments have been accounted for appropriately.
Area of focus
How our audit addressed the area of focus
and
subsidiaries
Treatment of exploration and evaluation
expenditure
Reabold’s
associated
undertakings are involved in the extraction of oil
and gas. Under IFRS 6, Exploration for and
Evaluation of Mineral Resources, the Group
must establish an accounting policy specifying
which
as
exploration and evaluation assets and apply it
consistently.
expenditures
recognised
are
There is a risk that the accounting policy is not
applied consistently across all subsidiaries and
associated undertakings, therefore we consider
the treatment of exploration and evaluation
expenditure as a key audit matter.
Our procedures included but were not limited to the following:
•
•
•
reviewing and assessing the accounting policy in place to
ensure that the point at which exploration and evaluation assets
are recognised is reasonable and relevant;
reviewing the exploration and evaluation accounting policies
within the subsidiary and associated companies, to ensure they
are consistent with the Group policy; and
reviewing a sample of items and corroborating to external
the
information
capitalisation of costs is in accordance with the Group policy.
to projects
in relation
to ensure
that
On the basis of our audit procedures, we are satisfied that the accounting
policy in place for exploration and evaluation expenditure is reasonable
and that it has been applied consistently throughout the Group.
Area of focus
How our audit addressed the area of focus
Share Based Payments
During 2018, three of the directors of the
company were issued with a total of 125 million
share options in the company in return for the
rendering of services. These share based
payments are classified by the company as
equity settled share based payments.
The accounting for share based payments was a
key audit matter because the expense recognised
was material and incorporates a judgemental
value option. The company valued the options
using a Black-Scholes Model, whereby inputs
such as volatility, dividend yield and risk free
rate require significant level of judgement. The
impact on the profit and loss for the year is a
charge of £995,000.
Our procedures included but were not limited to the following:
•
compared the terms and conditions of the options issued during
the appropriate board minutes, RNS
the year with
announcements and with the individual share option deeds with
the directors;
• obtained the company’s valuation model and assessed the
reasonableness of the inputs, including performing sensitivities
on the key judgemental assumptions; and
evaluated the adequacy of the disclosures in the financial
statements in relation to the share based payments.
•
On the basis of our audit procedures, assumptions used in the valuation
model and the calculation of the current year change is appropriate.
Reabold Resources Plc Report & Accounts
33
REABOLD RESOURCES PLC
Independent auditor’s report to the members of Reabold Resources Plc
_______________________________________________________________________________________
Our application of materiality
We apply the concept of materiality both in planning and performing our audit and in evaluating the effect of misstatements on the
financial statements and our audit. Materiality is used so we can plan and perform our audit to obtain reasonable, rather than absolute
assurance about whether the financial statements are free from material misstatement. The level of materiality we set is based on our
assessment of the magnitude of misstatements that individually or in aggregate, could reasonably be expected to have influence on the
economic decisions the users of the financial statements may take based on the information included in the financial statements. Based
on our professional judgement the level of overall materiality we set for the financial statements is outlined below:
Overall materiality:
Benchmark applied:
Group: £300,000
Parent Company: £226,000
This has been calculated with reference to total assets, of which it represents approximately
2% and 1.2% for the Group and Parent Company respectively.
Basis for chosen benchmark:
Total assets have been identified as the principal benchmark within the financial statements as
it is considered to be the focus of the shareholders due to the investments, namely the
subsidiaries and associated entities, being at an early stage of revenue generation.
2% has been chosen to reflect the level of understanding of the
stakeholders of the Group in relation to the inherent uncertainties around accounting estimates
and judgements. A lower threshold was applied to the Parent Company to ensure the aggregate
of materiality levels applied to all components was at a reasonable level, relative to the Group
materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality for the Group was £240,000 and for the Parent Company was £181,000. This is approximately 80% of overall
materiality. We agreed with the Board of Directors that we would report to them misstatements identified during our audit of the Group
above £9,000 and Parent Company above £6,500 as well as any misstatements below that amount that, in our opinion, warranted
reporting for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgements such as making assumptions on significant accounting
estimates.
We gained an understanding of the legal and regulatory framework applicable to the Group and the Parent Company, the structure of
the Group and the Parent Company and the industry in which it operates. We considered the risk of acts by the company which were
contrary to the applicable laws and regulations including fraud. We designed our audit procedures to respond to those identified risks,
including non-compliance with laws and regulations (irregularities) that are material to the financial statements.
We focused on laws and regulations that could give rise to a material misstatement in the financial statements, including, but not limited
to, the Companies Act 2006.
We tailored the scope of our Group audit to ensure that we performed sufficient work to be able to give an opinion on the financial
statements as a whole. We used the outputs of a risk assessment, our understanding of the Parent Company and Group’s accounting
processes and controls and its environment and considered qualitative factors in order to ensure that we obtained sufficient coverage
across all financial statement line items.
Our tests included, but were not limited to, obtaining evidence about the amounts and disclosures in the financial statements sufficient
to give reasonable assurance that the financial statements are free from material misstatement, whether caused by irregularities
including fraud, review of minutes of directors’ meetings in the year and enquiries of management. As a result of our procedures, we
did not identify any Key Audit Matters relating to irregularities, including fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are
discussed under “Key audit matters” within this report.
Our Group audit scope included an audit of the Group and Parent Company financial statements of Reabold Resources Plc. Based on
our risk assessment, all entities within the Group, except for Reabold Resources Limited and Gaelic Resources LLC which are holding
companies with no impact on the consolidated financial statements, were subject to full scope audit, which was performed by the Group
audit team.
Reabold Resources Plc Report & Accounts
34
REABOLD RESOURCES PLC
Independent auditor’s report to the members of Reabold Resources Plc
_______________________________________________________________________________________
At the Parent Company level, we also tested the consolidation process and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the aggregated financial information.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report
and financial statements, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Highlights, Chairman’s Statement, Strategic Report, Directors’ Report or
Corporate Governance Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you
if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 30, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Reabold Resources Plc Report & Accounts
35
REABOLD RESOURCES PLC
Independent auditor’s report to the members of Reabold Resources Plc
_______________________________________________________________________________________
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of the audit report
This report is made solely to the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body for our audit work, for this report, or for the opinions we have
formed.
Samantha Russell (Senior Statutory Auditor) for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
Date: 26 June 2019
Reabold Resources Plc Report & Accounts
36
REABOLD RESOURCES PLC
Group statement of comprehensive income for the year ended 31 December 2018
_____________________________________________________________________________________
Revenue
Cost of sales
Gross profit
Net gain in financial assets measured at fair value through P&L
Other income
Exploration costs
Impairment
Administration expenses
Share based payments expense
Loss on ordinary activities
Share of losses of associates
Finance income
Loss before tax for the period
Taxation
Loss for the financial year
Other comprehensive income:
Foreign exchange gain on translation of foreign subsidiaries
Other comprehensive income
Notes
2018
£’000
2017
£’000
6
13
17
13
24
7
14
10
194
(83)
111
6
11
(55)
-
(939)
(995)
-
-
-
-
-
-
(150)
(443)
(559)
(1,861)
(1,152)
(165)
10
-
-
(2,016)
(1,152)
-
-
(2,016)
(1,152)
-
67
67
-
-
-
Total comprehensive loss for the financial year
(1,949)
(1,152)
Attributable to:
Equity holders
(1,949)
(1,949)
(1,152)
(1,152)
Loss per share
Basic and fully diluted loss per share (pence)
11
(0.07)
(0.18)
All amounts relate to continuing operations.
The notes on pages 44 to 69 form part of these financial statements.
Reabold Resources Plc Report & Accounts
37
REABOLD RESOURCES PLC
Group statement of financial position as at 31 December 2018
_____________________________________________________________________________________
Company no. 3542727
ASSETS
Non-current assets
Exploration & evaluation assets
Property, plant & equipment
Investments in associates
Goodwill on acquisition
Investments in equity instruments
Current assets
Inventory
Prepayments
Trade and other receivables
Restricted cash
Cash and cash equivalents
Total assets
EQUITY
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Share based payment reserve
Foreign currency translation reserve
Retained loss
Total shareholders’ funds
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Accruals
Non-Current liabilities
Deferred tax liability
Notes
2018
£’000
2017
£’000
17
18
14
12
13
19
20
23
21
22
21
12
3,131
1,539
7,570
329
-
12,569
32
33
425
176
7,112
7,778
-
-
-
-
550
550
-
32
30
-
5,307
5,369
20,347
5,919
3,935
25,301
200
1,555
67
(11,745)
19,313
1,654
13,048
200
559
-
(9,729)
5,732
442
184
79
705
329
329
65
101
21
187
-
-
Total equity and liabilities
20,347
5,919
Approved by the Board of Directors on 26 June 2019
Signed on behalf of the board of directors:
Anthony Samaha
Director
The notes on pages 44 to 69 form part of these financial statements.
Reabold Resources Plc Report & Accounts
38
REABOLD RESOURCES PLC
Company no. 3542727
Company statement of financial position as at 31 December 2018
_____________________________________________________________________________________
Notes
14
15
13
16
19
23
21
22
21
2018
£’000
7,570
1,933
-
9,503
3,692
32
145
6,147
10,016
2017
£’000
-
-
550
550
-
32
30
5,307
5,369
19,519
5,919
3,935
25,301
200
1,555
(11,755)
19,236
1,654
13,048
200
559
(9,729)
5,732
71
184
28
283
65
101
21
187
19,519
5,919
ASSETS
Non-current assets
Investments in associates
Subsidiaries
Investments in equity instruments
Current assets
Loan to subsidiary
Prepayments
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Share based payment reserve
Retained loss
Total shareholders’ funds
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Accruals
Total liabilities
Total equity and liabilities
Approved by the Board of Directors on 26 June 2019
Signed on behalf of the board of directors:
Anthony Samaha
Director
The notes on pages 44 to 69 form part of these financial statements.
Reabold Resources Plc Report & Accounts
39
REABOLD RESOURCES PLC
Group statement of cash flows for the year ended 31 December 2018
_____________________________________________________________________________________
Cash flows from operating activities
Loss for the financial year
Adjustments:
Net gain on financial assets at fair value through profit or loss
Capitalised E&E expenditure expensed to exploration costs
Depreciation
Impairment
Share based payments
Realised foreign exchange gain
Operating cash flows before movement in working capital
Decrease/(increase) in receivables
Increase/(decrease) in payables and accruals
Increase/(decrease) in provisions
Decrease/(increase) in prepayments
Decrease/(increase) in inventory
Cash used in operating activities
Share of losses of associates
Net cash used in operating activities
Cash flows from investing activities
Acquisition of investments in associates
Acquisition of investment in equity instruments
Proceeds from divestment of equity instruments
Expenditure on oil & gas property
Expenditure on E & E assets
Cash acquired on acquisition of subsidiary
Additions to restricted cash
Loan to subsidiary pre-acquisition
Net cash used in investing activities
Cash flows from financing activities
Share placement net proceeds
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Cash and cash equivalents comprises:
Cash and cash equivalents
Overdraft and borrowings
The notes on pages 44 to 69 form part of these financial statements.
Notes
2018
£’000
2017
£’000
(2,016)
(1,152)
13
17
18
13
24
19
21
22
14
14
13
18
(6)
55
32
-
995
-
(940)
(395)
387
83
-
(32)
(897)
165
(732)
(7,179)
-
-
(1,571)
(371)
120
(44)
(303)
(9,348)
11,909
11,909
1,829
(24)
5,307
7,112
7,112
-
7,112
-
-
-
150
559
(6)
(449)
(29)
54
101
(33)
-
(355)
-
(355)
-
(795)
301
-
-
-
-
-
(494)
5,816
5,816
4,967
-
340
5,307
5,307
-
5,307
Reabold Resources Plc Report & Accounts
40
REABOLD RESOURCES PLC
Company statement of cash flows for the year ended 31 December 2018
_____________________________________________________________________________________
Cash flows from operating activities
Loss for the financial year
Adjustments:
Net gain on financial assets at fair value through profit or loss
Impairment
Share based payments
Gain on foreign exchange
Operating cash flows before movement in working capital
Decrease/(increase) in receivables
Increase/(decrease) in payables and accruals
Increase/(decrease) in provisions
Decrease/(increase) in prepayments
Net cash used in operating activities
Share of losses of associates
Net cash used in operating activities
Cash flows from investing activities
Purchase of investments in associates
Purchase of equity instruments
Loan to subsidiary
Proceeds from divestment of available for sale investments
Net cash used in investing activities
Cash flows from financing activities
Share placement net proceeds
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Cash and cash equivalents comprises:
Cash and cash equivalents
Overdraft and borrowings
The notes on pages 44 to 69 form part of these financial statements.
Notes
2018
£’000
2017
£’000
(2,026)
(1,152)
13
13
24
19
21
22
14
14
13
(6)
-
995
(41)
(1,078)
(115)
13
83
-
(1,097)
165
(932)
(7,179)
-
(2,958)
-
(10,137)
11,909
11,909
840
5,307
6,147
6,147
-
6,147
-
150
559
(6)
(449)
(29)
54
101
(32)
(355)
-
(355)
-
(795)
-
301
(494)
5,816
5,816
4,967
340
5,307
5,307
-
5,307
Reabold Resources Plc Report & Accounts
41
REABOLD RESOURCES PLC
Group statement of changes in equity for the year ended 31 December 2018
_____________________________________________________________________________________
Share
capital
Share
premium
account
Capital
redemption
reserve
Share based
payments
reserve
Retained
earnings
Total
Foreign
currency
translation
reserve
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Balance as at 31 December 2016
435
8,451
200
Total comprehensive loss for the year
-
-
Changes in equity for 2017
Issue of share capital
Share based payments
1,219
-
4,597
-
-
-
-
Balance as at 31 December 2017
1,654
13,048
200
Total comprehensive loss for the year
-
-
Changes in equity for 2018
12,931
Issue of share capital
Transaction costs on issue of share capital
(677)
-
Share based payments
-
Other comprehensive income
2,281
-
-
-
-
-
-
-
-
-
-
-
559
559
-
-
-
995
-
-
-
-
-
-
-
-
-
-
67
(8,577)
509
(1,152)
(1,152)
-
-
5,816
559
(9,729)
5,732
(2,016)
(2,016)
-
-
-
-
15,212
(677)
995
67
Balance as at 31 December 2018
3,935
25,302
200
1,554
67
(11,745)
19,313
The notes on pages 44 to 69 form part of these financial statements.
Reabold Resources Plc Report & Accounts
42
REABOLD RESOURCES PLC
Company statement of changes in equity for the year ended 31 December 2018
_____________________________________________________________________________________
Share
capital
Share
premium
account
Capital
redemption
reserve
Share
based
payments
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
£’000
Balance as at 31 December 2016
435
8,451
200
Total comprehensive loss for the year
-
-
Changes in equity for 2017
Issue of share capital
Share based payments
1,219
-
4,597
-
-
-
-
-
-
(8,577)
509
(1,152)
(1,152)
-
559
-
-
5,816
559
Balance as at 31 December 2017
1,654
13,048
200
559
(9,729)
5,732
Total comprehensive loss for the year
-
-
Changes in equity for 2017
Issue of share capital
Transaction costs on issue of share capital
Share based payments
2,281
-
-
12,931
(677)
-
-
-
-
-
-
(2,026)
(2,026)
-
-
995
-
-
-
15,212
(677)
995
Balance as at 31 December 2018
3,935
25,302
200
1,554
(11,755)
19,236
The notes on pages 44 to 69 form part of these financial statements.
Reabold Resources Plc Report & Accounts
43
REABOLD RESOURCES PLC
Notes to the financial statements
1.
Reporting entity
Reabold Resources Plc is a public limited company registered in England and Wales under the Companies Act, with registered
number 3542727, and limited by shares. The Company’s registered office is at 20 Primrose Street, London EC2A 2EW. These
consolidated financial statements comprise the Company and its subsidiaries (together referred to as the “Group” and individually
as “Group entities”). The nature of the Group’s operations and its principal activities are set out in the Directors’ report on pages
22 to 24.
2.
Basis of preparation
Statement of compliance
(a)
The consolidated financial statements for the year ended 31 December 2018 have been prepared under International Financial
Reporting Standards, as adopted for use by the European Union. The consolidated financial statements were authorised for issue
by the Board of Directors on 26 June 2019.
Going concern
(b)
The consolidated financial statements have been prepared on the going concern basis. The Directors have prepared cash flow
forecasts for the period ending 30 June 2020 which take account of the current cost and operational structure of the Group and
investment agreements. These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in
business for a period of at least twelve months from the date of approval of these financial statements. Accordingly, the financial
statements have been prepared on a going concern basis.
Basis of measurement
(c)
The consolidated financial statements have been prepared on a historical cost basis, except for investments in equity instruments,
and share based payments that have been measured at fair value.
Functional and presentation currency
(d)
These consolidated financial statements are presented in pounds sterling which is the Company’s functional currency. All amounts
have been rounded to the nearest thousands of pounds sterling (£1,000), unless otherwise indicated.
Use of estimates and judgments
(e)
The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
prospectively.
Judgments
(i)
Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognised
in the consolidated financial statements is stated below and included in the following notes:
•
IFRS 10 – Management have evaluated and made judgement that the Company is not an investment entity with reference to
IFRS 10.
• Note 14 – Investment in associates impairment judgement. Judgements are required in assessing whether there is any indication
that an asset may be impaired at each reporting date. Management assess a range of external and internal indicators of
impairment in exercising its judgment. External factors assessed include market value declines, negative changes in the
economy, market prices, technology and applicable regulatory conditions and laws. Internal factors assessed include technical
and economic performance below expectations.
• Note 17 – Exploration and evaluation accounting judgment. The Group policy is to capitalise all expenditure incurred during
the appraisal phase until the determination process has been completed or until such point as commercial reserves have been
established. Exploration and evaluation assets are expected to be recouped in future through successful development and
exploitation of the area of interest.
Assumptions and estimation uncertainties
(ii)
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are included in the following notes:
Reabold Resources Plc Report & Accounts
44
REABOLD RESOURCES PLC
Notes to the financial statements
• Note 13 – Fair value assessment of investments in equity instruments. A significant source of estimation uncertainty is the fair
value of the Company’s unlisted investments, which are Level 2 unlisted companies, with inputs other than quoted prices. The
Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Key inputs
into the estimation of fair value of the Company’s investments was observable arm’s length transactional prices in the shares
of the investee companies. However, in limited circumstances, cost may be an appropriate estimate of fair value. That may be
the case if insufficient more recent information is available to measure fair value, or if there is a wide range of possible fair
value measurements and cost represents the best estimate of fair value within that range.
• Note 17 – Impairment test of E&E assets. The amounts for intangible E&E assets represent active E&E projects. These amounts
will be written off to the income statement as exploration costs unless commercial reserves are established or the determination
process is not completed and there are indications of impairment in accordance with the Group’s accounting policy. In assessing
whether there should be a test of E&E assets for impairment, the Company will consider facts and circumstances including:
o
the period for which the entity has the right to explore in the specific area has expired during the period or will expire in
the near future, and is not expected to be renewed;
o substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither
budgeted nor planned;
o exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable
quantities of mineral resources and the entity has decided to discontinue such activities in the specific area;
o sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount
of the E&E asset is unlikely to be recovered in full from successful development or by sale.
• Note 18 – Impairment test of property, plant and equipment assets. Their carrying value is checked by reference to the net
present value of future cashflows which requires key assumptions and estimates in relation to commodity prices that are based
on forward curves for a number of years and the long-term corporate economic assumptions thereafter, discount rates that are
adjusted to reflect risks specific to individual assets, the quantum of commercial reserves and the associated production and
cost profiles. Future development costs are estimated taking into account the level of development required to produce the
reserves by reference to operators, where applicable, and internal engineers.
• Note 24 – Share based payment arrangements. The Group measures the cost of equity-settled transactions by reference to the
fair value of the equity instruments at the date at which they are granted. The fair value of shares is determined by the share
price, and the fair value of options is determined using the Black-Scholes model.
3.
Significant accounting policies
The Group has consistently applied the following significant accounting policies to all periods presented in these consolidated
financial statements.
Basis of consolidation
(a)
The consolidated financial statements comprise the financial statements of Reabold Resources Plc and its subsidiaries as at 31
December 2018. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred out of the Group. Control exists where the company has the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities. Where subsidiaries follow
differing accounting policies from those of the Group, those accounting policies have been adjusted to align with those of the
Group. Inter-company balances and transactions between Group companies are eliminated on consolidation, though foreign
exchange differences arising on inter-company balances between subsidiaries with differing functional currencies are not offset.
Business combinations
(b)
The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or
other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at
the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business
combination, the fair value of the instruments is their published market price as at the date of exchange, adjusted for any conditions
imposed on those shares. Transaction costs arising on the issue of equity instruments are recognised directly in equity.
All identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date. The excess of the cost of the business combination over the net fair value of the Group's
share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the Group's share of the
net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the income statement, but only
after a reassessment of the identification and measurement of the net assets acquired.
Reabold Resources Plc Report & Accounts
45
REABOLD RESOURCES PLC
Notes to the financial statements
Interests in equity-accounted investees
(c)
The Group’s interests in equity-accounted investees comprise interests in associates. Associates are those entities in which the
Group has significant influence, but not control or joint control, over the financial and operating policies. Interests in associates are
accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial
recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income
(OCI) of equity-accounted investees, until the date on which significant influence ceases.
Foreign currency translation
Foreign operations
(d)
(i)
The assets and liabilities of subsidiaries that have a functional currency different from that of the Company are translated into
sterling at the closing rate at the date of the statements of financial position, and revenue and expenses are translated at the average
rate for the period and the difference is recorded in other comprehensive income (loss).
Transactions in foreign currency
(ii)
Transactions in foreign currencies are translated at the exchange rates prevailing at the date of transaction. Monetary assets and
liabilities denominated in foreign currencies are translated at exchange rates at the reporting date. All differences that arise are
recorded in net loss. Non-monetary assets measured at historical cost in a foreign currency are translated using the exchange rates
at the date of the initial transactions.
Revenue
(e)
Revenue is measured by reference to the fair value of consideration received or receivable by the Group for services provided,
excluding sales taxes and trade discounts. Revenue is credited to the Statement of Comprehensive Income in the period it is deemed
to be earned.
Revenue from the sale of oil and gas is recognised when the significant risks and rewards of ownership have been transferred,
which is considered to occur when title passes to the customer. This generally occurs when the product is physically transferred
into a vessel, pipe or other delivery mechanism.
Revenue from the production of oil and gas, in which the Group has an interest with other producers, is recognised based on the
Group’s working interest and the terms of the relevant production sharing contracts. Differences between oil lifted and sold and
the Group’s share of production are not significant.
Cost of sales
(f)
Production expenditure, crude treatment and processing expenditure, crude evacuation and lifting expenditure, depreciation,
depletion and amortisation of oil and gas assets and crude handling expenditure are reported as costs of sales.
Inventories
(g)
Inventories are valued at the lower of cost and net realisable value. Cost of consumable materials is determined using the weighted
average method and includes expenditures incurred in acquiring the stocks, and other costs incurred in bringing them to their
existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
Taxation
(h)
The tax charge represents the sum of current and deferred tax.
Current tax payable is based on taxable profits for the year. Taxable profits differ from net profits as reported in the income
statement because it excludes items that are taxable or deductible in other years and items that are not taxable or deductible. The
Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using
the liability method. Deferred tax liabilities are recognised for all temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets are
offset when there is a legally enforceable right to offset current tax assets against current liabilities and when deferred tax assets
and deferred tax liabilities relate to income taxes levied by the same tax authority on either the same taxable entity or different
taxable entity where there is an intention to settle on a net basis.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability or the asset is realised.
Reabold Resources Plc Report & Accounts
46
REABOLD RESOURCES PLC
Notes to the financial statements
Oil & gas assets
Licence acquisition costs
(i)
(j)
Licence acquisition costs are capitalised as intangible exploration and evaluation (“E&E”) assets. These costs are reviewed on a
continual basis by management to confirm that activity is planned and that the asset is not impaired. If no future activity is planned,
the remaining balance of the licence and property acquisition costs is written off. Capitalised licence acquisition costs are measured
at cost less accumulated amortisation and impairment losses. Costs incurred prior to having obtained the legal rights to explore an
area are expensed directly as they are incurred.
Exploration expenditure
(ii)
Exploration expenditure is expensed to the profit or loss statement as and when it is incurred and included as part of cash flows
from operating activities.
Evaluation expenditure
(iii)
Evaluation expenditure is capitalised to the Statement of Financial Position. All expenditure incurred during the appraisal phase is
capitalized until the determination process has been completed or until such point as commercial reserves have been established.
Evaluation is deemed to be activities undertaken from the beginning of the pre-feasibility study conducted to assess the technical
and commercial viability of extracting a resource before moving into the Development phase. The criteria for carrying forward the
costs are:
• Such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively
by its sale; or
• evaluation activities in the area of interest which has not yet reached a state which permits a reasonable assessment of the
existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area
are continuing.
Costs carried forward in respect of an area of interest which is abandoned are written off in the year in which the abandonment
decision is made.
Treatment of intangible E&E assets at conclusion of appraisal activities
(iv)
Intangible E&E assets related to each cost pool are carried forward until the existence, or otherwise, of commercial reserves have
been determined, subject to certain limitations including review for indications of impairment. If commercial reserves have been
discovered, the carrying value, after any impairment loss, of the relevant E&E assets, are then reclassified as development and
production assets within property plant and equipment. However, if commercial reserves have not been found, the capitalised costs
are charged to expense.
Such reserves may be considered commercially producible if management has the intention of developing and producing them and
such intention is based upon:
• a reasonable assessment of the future economics of such production;
• a reasonable expectation that there is a market for all or substantially all the expected hydrocarbon production;
• evidence that the necessary production, transmission and transportation facilities are available or can be made available; and
•
the making of a final investment decision.
Development and production assets
(v)
Development and production assets, classified within property, plant and equipment, are accumulated generally on a field-by-field
basis and represent the costs of developing the commercial reserves discovered and bringing them into production, together with
the E&E expenditures incurred in finding commercial reserves transferred from intangible E&E assets.
Depreciation of producing assets
(vi)
The net book values of producing assets are depreciated generally on a field-by-field basis using the unit-of-production method by
reference to the ratio of production in the year and the related commercial reserves of the field, taking into account the future
development expenditure necessary to bring those reserves into production.
(vii) Disposals
Net cash proceeds from any disposal of an intangible E&E asset are initially credited against the previously capitalised costs. Any
surplus proceeds are credited to the income statement.
(viii) Decommissioning
Provision for decommissioning is recognised in full when the related facilities are installed. The amount recognised is the present
value of the estimated future expenditure. A corresponding amount equivalent to the provision is also recognised as part of the cost
of the related oil and gas property. This is subsequently depreciated as part of the capital costs of the production facilities. Any
change in the present value of the estimated expenditure is dealt with prospectively as an adjustment to the provision and the oil
and gas property. The unwinding of the discount is included in finance cost.
Reabold Resources Plc Report & Accounts
47
REABOLD RESOURCES PLC
Notes to the financial statements
Share based payments
(i)
The Company has an equity-settled, share-based compensation plan, under which the entity receives services from employees as
consideration for equity instruments (options) of the Company. The fair value of the employee services received in exchange for
the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value
of the options granted:
•
• Excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth
Including any market performance conditions;
targets, or remaining an employee of the entity over a specified time period; and
Including the impact of any non-vesting conditions (for example, the requirement for employees to save).
•
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense
is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.
In addition, in some circumstances, employees may provide services in advance of the grant date, and therefore the grant-date fair
value is estimated for the purposes of recognising the expense during the period between service commencement period and grant
date.
At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the
non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a
corresponding adjustment to equity.
When the options are exercised, the Company issues new shares. The proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share premium.
Financial instruments
(j)
Financial assets and financial liabilities are recognised in the Company’s statements of financial position when the Company has
become a party to the contractual provisions of the instrument.
IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018. IFRS 9 replaces IAS 39 and contains a new
classification and measurement approach for financial assets. The classification determines how the financial assets are categorised
and measured in the financial statements and therefore is the foundation for its accounting. IFRS 9 contains four principal
classification categories for financial assets:
• amortised cost;
•
• FVOCI with no recycling of gains or losses to profit or loss on derecognition; and
•
fair value through other comprehensive income (“FVOCI”) with gains or losses recycled to profit or loss on derecognition;
fair value through profit or loss (“FVTPL”).
The following summarises the accounting policies in respect of financial instruments upon adoption of IFRS 9 by the Company:
Classification
Financial assets measured at
amortised cost
Financial instrument
Cash
Description
Cash balances with banks
Cash restricted
Cash held in trust
Other receivables
Loans receivable
Equity investments
Restricted cash is denoted as restricted when it is not
under the exclusive control of the Group.
Cash balances held in trust for specified purposes - not
available to fund normal operations
Amounts receivable from third parties
Loans receivable and long-term receivables
Equities of publicly traded and private entities
Equity investments
Equities of publicly traded and private entities
Accounts payable and accrued
labilities
Amounts payable to suppliers and third parties
Financial assets measured at
FVTPL
Financial assets measured at
FVOCI (with no recycling)
Financial liabilities
Under IFRS 9 the Company can classify, measure and account for its loans receivable and other receivables as amortised cost,
FVOCI (with recycling) and FVTPL while equity investments can be classified as FVOCI (with no recycling) or FVTPL. The
Company analyses each loan receivable, other receivables and equity investment on an individual basis. The analysis and
classification is driven by the following criteria.
Reabold Resources Plc Report & Accounts
48
REABOLD RESOURCES PLC
Notes to the financial statements
Classification
Loans and receivables
Amortised cost
Financial assets measured at
FVOCI (with recycling)
FVTPL
Criteria
• Held within a business model whose objective is to hold assets in order to collect
contractual cash flows and;
• Contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
• Held within a business model in which assets are managed to achieve a particular
objective by both collecting contractual cash flows and selling financial assets and;
• Contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
• All loans receivable and investments in funds not measured at amortised cost or at FVOCI
must be measured at FVTPL.
Classification
Investments in equity instruments
•
FVTPL
• Evidence of historical short-term profit making on similar instruments.
Investment acquired with the purpose of sale or,
Criteria
FVOCI (with no recycling)
•
Investment made primarily for non-financial benefits such as strategic alliances and
strategic investments.
After classification as amortised cost, FVTPL or FVOCI, the Company uses the following policy for initial measurement and
subsequent measurement at each reporting period.
Classification
Amortised cost
Initial measurement
Fair value less expected
credit loss
Subsequent measurement
Amortised cost using the effective
interest method
FVTPL
Fair value
Re-measured at subsequent
reporting dates to fair value
FVOCI (with no
recycling)
Fair value
Financial liabilities
Fair value
Re-measured using the Black-
Scholes option pricing valuation
model or other techniques if quoted
market prices are not available.
Re-measured at subsequent
reporting dates to fair value
using quoted market prices, if
available.
Re-measured using the Black-
Scholes option pricing valuation
model or other techniques if quoted
market prices are not available.
Amortised cost using the
effective interest method.
Financial liabilities
measured at FVTPL
Fair value
Re-measured at subsequent
reporting dates to fair value
Re-measured using the Black-
Scholes option pricing valuation
model or other techniques if quoted
market prices are not available.
Changes in fair value
Reported in consolidated statement of
loss when realized or impaired. Interest
accretion on
in
loans
“Finance income” on the consolidated
statement of loss.
Reported in “Net gain (loss) on financial
assets measured at FVTPL” on the
consolidated statement of loss.
is recorded
Reported in consolidated statement of
other comprehensive loss.
There is no recycling of amounts from
the statement of comprehensive loss to
the statement of loss upon the disposal
of the financial asset.
is
Reported in consolidated statement of
loss when liability is extinguished. The
interest accretion
in
“Finance expense” on the consolidated
statement of loss.
Reported in “Net gain (loss) on financial
liabilities measured at FVTPL” on the
consolidated statement of loss.
recorded
Reabold Resources Plc Report & Accounts
49
REABOLD RESOURCES PLC
Notes to the financial statements
(k)
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and
non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the group uses observable market data as far as possible. Fair values are
categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input
that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change
has occurred. Further information about the assumptions made in measuring fair values is included in the following notes:
Note 13 – Investments available for sale
Note 24 – Share-based payment arrangements
Note 27 – Financial risk management and financial instruments
Unlisted Investments are therefore classified at level 2 of the fair value hierarchy when initially recognised.
Capital and reserves
Share capital
(l)
(i)
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Share premium
(ii)
Representing the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the
share issue.
Capital redemption reserve
(iii)
Where a company acquires its own shares out of free reserves, then a sum equivalent to the nominal value is transferred to a capital
redemption reserve.
Share based payments reserve
(iv)
Represents the value of equity benefits provided to employees and directors as part of their remuneration and provided to
consultants and advisors hired by the Company from time to time as part of the consideration paid.
Foreign currency translation reserve
(v)
Exchange differences arising on consolidating the assets and liabilities of the Group’s subsidiaries are classified as equity and
transferred to the Group’s translation reserve.
Retained losses
(vi)
Cumulative net gains and losses recognised in the financial statements.
Provisions
(m)
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
Reabold Resources Plc Report & Accounts
50
REABOLD RESOURCES PLC
Notes to the financial statements
Contingent liabilities
(n)
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group, or a present
obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation; or the amount of the obligation cannot be measured with sufficient
reliability.
Contingent liabilities are only disclosed and not recognised as liabilities in the statement of financial position. If the likelihood of
an outflow of resources is remote, the possible obligation is neither a provision nor a contingent liability and no disclosure is made.
Capital commitments
(o)
Capital commitments include all projects for which specific board approval has been obtained up to the reporting date. Projects
still under investigation for which specific board approvals have not yet been obtained are excluded.
Earnings per share
(p)
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
during the year. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and
the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares which comprise
share options granted to employees. Potential ordinary shares are treated as dilutive when, and only when, their conversion to
ordinary shares would decrease earnings per share or increase loss per share from continuing operations.
Segment reporting
(q)
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incurs
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group
defines geographical areas as operating segments in accordance with IFRS 8- Operating Segments.
4.
Adoption of new and revised International Financial Reporting Standards
Standards, amendments and interpretations adopted in the current financial year ended 31 December 2018
The adoption of the following mentioned standards, amendments and interpretations in the current year have not had a material
impact on the Group’s and the Company’s financial statements:
(i)
IFRS 9 “Financial Instruments”
The IASB have released IFRS 9 following completion of the project to replace IAS 39 ‘Financial Instruments: Recognition and
Measurement’. The new standard introduces extensive changes to IAS 39’s guidance on the classification and measurement of
financial assets and introduces a new ‘expected credit loss’ model for the impairment of financial assets. IFRS 9 also provides new
guidance on the application of hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after 1 January
2018 and has been endorsed by the European Union.
Impact of transition to IFRS 9
Upon adoption of IFRS 9, the Company has not restated prior periods and therefore the comparative information for year ended 31
December 2017 is reported under IAS 39. The impact of the transition on both the Company and the Group is as follows:
As at 31 December 2017
As at 1 January 2018
IAS 39 classification
IAS 39
measurement
Other receivables
Other receivables Amortized cost
IAS 39
Carrying
amount
(£’000)
30
IFRS 9
classification &
measurement
Amortised cost
Equity instruments
Available for Sale
FVOCI
550
FVTPL
Accounts payable and
accruals
Transition impact
Financial liabilities Amortized cost
86
Amortised cost
IFRS 9
Carrying
amount
(£’000)
30
550
86
Impact on
opening
deficit
Impact on
opening
OCI
-
-
-
-
-
-
-
-
Pursuant to IFRS 9, the Company elected to classify the investments in equity instruments as fair value through P&L, as these
investments were acquired for the purpose of sale, in line with the Company’s investment strategy in respect to Business Stream
1.
Reabold Resources Plc Report & Accounts
51
REABOLD RESOURCES PLC
Notes to the financial statements
(ii)
IFRS 15 “Revenue from Contracts with Customers”
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’,
and several revenue-related interpretations. The new standard establishes a control-based revenue recognition model and provides
additional guidance in many areas not covered in detail under existing IFRSs. These include how to account for arrangements with
multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common
complexities. IFRS 15 is effective for reporting periods beginning on or after 1 January 2018. This standard has been endorsed by
the European Union. There was no revenue reported in the Group or Company in the year ended 31 December 2017 and therefore
this standard does not have a material impact on the Company’s financial statements.
Standards, amendments and interpretations in issue but not yet effective
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective, and have not been adopted early by the Company.
Management anticipates that all of the pronouncements will be adopted in the Company's accounting policies for the first period
beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are
expected to be relevant to the Company’s financial statements is provided below. Certain other new standards and interpretations
have been issued but are not expected to have a material impact on the Company’s financial statements.
(i)
IFRS 2 “Classification and Measurement of Share-based Payment Transactions”
On June 20, 2016, the IASB issued amendments to IFRS 2, Share-based Payment, clarifying how to account for certain types of
share-based payment transactions.
As a practical simplification, the amendments can be applied prospectively. Retrospective, or early, application is permitted if
information is available without the use of hindsight.
The amendments provide requirements relating to the accounting of:
• effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
•
share-based payment transactions with a net settlement feature concerning the legal obligation related to withholding tax
obligations; and
• a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from
cash-settled to equity-settled.
The amendments to IFRS 2 are not yet effective for the Company.
(ii)
IFRS 16 “Leases”
The IASB has published IFRS 16 ‘Leases’, completing its long-running project on lease accounting. The new Standard, which is
effective for accounting periods beginning on or after 1 January 2019, requires lessees to account for leases ‘on-balance sheet’ by
recognising a ‘right-of-use’ asset and a lease liability. It will affect most companies that report under IFRS and are involving in
leasing, and will have a substantial impact on the financial statements of lessees of property and high value equipment. This standard
has been endorsed by the European Union. This standard is assessed as not having a material impact on the Company‘s financial
statements.
5.
Segment analysis
The Directors consider the Group to have two segments, being Business Stream 1 (which encompasses the European based
investments in Corallian, Danube and Rathlin) and Business Stream 2 (which encompasses the Group’s project in California, USA).
The Business Stream 1 segment investments are currently predominantly in the appraisal phase, and the Business Stream 2 segment
investment is in evaluation and production phase. Corporate costs relate to the administration and financing costs of the Company
and are not directly attributable to the individual investments and projects. The Company’s registered office is located in the United
Kingdom.
Reabold Resources Plc Report & Accounts
52
REABOLD RESOURCES PLC
Notes to the financial statements
31 December 2018
Revenue
Cost of sales
Gross profit
Net gain in financial assets measured at FVTPL
Other income
Impairment
Exploration expenses
General and administration expenses
(Loss)/profit on ordinary activities before taxation
Share of losses of associates
Finance income
(Loss)/profit on ordinary activities before taxation
Taxation on profit on ordinary activities
(Loss)/profit on ordinary activities before taxation
Other comprehensive income
Total comprehensive income for the period
Segment assets
Unallocated corporate assets
Total assets
Segment liabilities
Unallocated corporate liabilities
Total liabilities
31 December 2017
Revenue
Cost of sales
Gross profit
Net gain in financial assets measured at FVTPL
Other income
Impairment
Exploration expenses
General and administration expenses
(Loss)/profit on ordinary activities before taxation
Share of losses of associates
Finance income
(Loss)/profit on ordinary activities before taxation
Taxation on profit on ordinary activities
(Loss)/profit on ordinary activities before taxation
Other comprehensive income
Total comprehensive income for the period
Segment assets
Unallocated corporate assets
Total assets
Segment liabilities
Unallocated corporate liabilities
Total liabilities
Business
Stream 1
Europe
£’000
Business
Stream 2
USA
£’000
Corporate
£’000
Total
£’000
-
-
-
6
-
-
-
-
6
(165)
-
(159)
-
(159)
-
(159)
7,570
-
7,570
-
-
-
194
(83)
111
-
-
-
(55)
(23)
33
-
-
33
-
33
-
33
6,476
-
6,476
751
-
751
-
-
-
-
11
-
-
(1,911)
(1,900)
-
10
(1,890)
-
(1,890)
67
(1,823)
-
6,301
6,301
-
283
283
194
(83)
111
6
11
-
(55)
(1,934)
(1,861)
(165)
10
(2,016)
-
(2,016)
67
(1,949)
14,046
6,301
20,347
751
283
1,034
Business
Stream 1
Europe
£’000
Business
Stream 2
USA
£’000
Corporate
£’000
Total
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500
-
500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(150)
-
(1,002)
(1,152)
-
-
(1,152)
-
(1,152)
-
(1,152)
-
5,419
5,419
-
187
187
-
-
-
-
-
(150)
-
(1,002)
(1,152)
-
-
(1,152)
-
(1,152)
-
(1,152)
500
5,419
5,919
-
187
187
Reabold Resources Plc Report & Accounts
53
REABOLD RESOURCES PLC
Notes to the financial statements
6.
Cost of sales
Production costs
Royalties
Depreciation of oil & gas assets
7.
Loss on ordinary activities before taxation
The loss on ordinary activities before taxation has been arrived at after
charging/(crediting):
Auditor’s remuneration – audit of Company
Auditor’s remuneration – other taxation services
Exploration costs
Foreign exchange gain
Net gain in financial assets measured at FVTPL
Impairment loss on available for sale investment
Provision for VAT non-claimable
Share based payments
Staff costs – Directors
8.
Staff costs
Staff employment costs were:
Wages and salaries
Social security costs
Other pension costs
2018
£’000
2017
£’000
39
12
32
83
-
-
-
-
Note
2018
£’000
2017
£’000
27
10
55
(42)
(6)
-
83
995
400
15
6
-
(6)
-
150
101
599
121
13
13
22
24
8
2018
£’000
354
40
6
400
2017
£’000
111
10
-
121
During the year there were no employees (2017: nil) employed by the Company excluding the Directors. The staff costs during
the year include the accrual of director fees in the amount of £4,000 (2017: £6,000) which were not paid during the reporting period.
9.
Directors’ remuneration
The emoluments paid to Directors during the year was as follows:
Directors
Sachin Oza
Stephen Williams
Anthony Samaha
Jeremy Edelman
Marcos Mozetic
Mike Felton
Salary &
fees
£’000
Share based
Payments
£’000
Pension
contribution
£’000
2018
Total
£’000
2017
Total
£’000
138
138
38
24
8
8
354
485
485
25
-
-
-
995
3
3
-
-
-
-
6
626
626
63
24
8
8
1,355
278
278
90
24
-
-
670
An accrual of £4,000 for director fees which were unpaid during the reporting period has been made.
Reabold Resources Plc Report & Accounts
54
REABOLD RESOURCES PLC
Notes to the financial statements
The directors are the key management personnel of the Company.
As at 31 December 2018, no Director was accruing benefits under a money purchase scheme (2017: none).
The total options held by directors as at 31 December 2018 was 315,000,000. Sachin Oza and Stephen Williams each held
150,000,000 options and Anthony Samaha held 15,000,000 options. The options have a weighted average exercise price of 0.8p
and a weighted average life of 3.0 years.
10.
Taxation
Loss before tax
Loss multiplied by standard rate of corporation tax in the UK
Effects of:
Share of operating loss of associates not taxable
Income and gains not taxable
Expenses not deductible for tax purposes
Deferred tax asset not recognised
Total tax for the year
No deferred tax assets have been recognised in the year (2017: nil).
2018
£’000
2017
£’000
(2,016)
(1,152)
(383)
(221)
31
(13)
198
167
-
-
-
165
56
-
The corporation tax rate was 20.0% from 1 April 2014 to 1 April 2017 and 19.0% from 1 April 2017. Thus the corporation tax rate
for the year ended 31 December 2018 is 19.0% (2017: 19.25%).
The Company has unused tax losses of £3.1 million and capital losses of £2.5 million. The deferred tax asset for these losses,
amounting to £952,000 (2017: £808,000) has not been recognised as the timing of profits is uncertain.
11.
Loss per share
The calculations of the basic and diluted earnings per share are based on the following data:
Loss for the year
Loss for the purpose of basic earnings per share
Number of shares:
Weighted average number of ordinary shares in issue during the year
Loss per share:
Basic and diluted loss per share (pence)
2018
£’000
(1,949)
(1,949)
2017
£’000
(1,152)
(1,152)
Number
Number
2,949,812,420 655,361,644
(0.07)
(0.18)
As the Group is reporting a loss in each period in accordance with IAS33, the share options are not considered dilutive because the
exercise of the share options would have the effect of reducing the loss per share.
Post balance date, as per note 28, the Company issued 1,980,000 new ordinary shares of 0.1 pence each in the Company as
consideration for an investment. This resulted in a non-material increase in the issued share capital of the Company.
Reabold Resources Plc Report & Accounts
55
REABOLD RESOURCES PLC
Notes to the financial statements
12.
Business combinations
On 4 July 2018, the Company completed the acquisition of:
(i) 100% of the issued share capital of Gaelic Resources Ltd (“Gaelic”), and its wholly owned US subsidiary Temporary
Energy LLC (“Temporary”); and
(ii) loans to Temporary by the vendors of Gaelic in the amount of US$914,000 (£692,005) (“Vendor Loan”).
The acquisition of Gaelic provided Reabold with options to participate in multiple near-term, high-impact, oil & gas leases in
California, United States, and was considered by management to be consistent with the Reabold strategy, providing high-impact
drilling opportunities with considerably de-risked wells with low drilling costs and a fast path to monetisation.
The total consideration for the acquisition of Gaelic and the Vendor Loan was together the issue of 420,000,000 new ordinary
shares in Reabold (the “Share Consideration”), representing a value of £2,625,000 at the closing price of 0.625 pence per share, on
4 July 2018. As at 4 July 2018, Temporary had loans outstanding of US$1,314,000 (£994,852), including a loan from Reabold of
US$400,000 (£302,845).
The fair value of the Vendor Loan acquired was assessed as £692,000, and the Share Consideration allocated as:
Allocation of Share Consideration
Acquisition of 100% of Gaelic
Acquisition of Vendor Loans of US$914,000
Total Share Consideration
Fair Value
£’000
1,933
692
2,625
The identifiable consolidated assets and liabilities of Gaelic were measured initially at their fair values at the acquisition date of 4
July 2018.
Net assets assumed:
Cash
Restricted cash
E&E assets – earn-in rights
E&E assets
Loans payable
Accounts payable
Deferred tax liability
Net assets
Goodwill on acquisition
Total
Consideration paid:
Allocated share consideration
Cost
£’000
Fair Value
Adjustment
£’000
Fair Value
£’000
120
132
681
111
(995)
(49)
-
-
-
-
-
-
1,933
-
-
-
(329)
1,604
329
1,933
120
132
2,614
111
(995)
(49)
(329)
1,604
329
1,933
1,933
Costs related to the acquisition of Gaelic in the amount of £74,091 were recognised as an expense in the reporting period.
Gaelic’s consolidated revenue and profit for the period since acquisition date to 31 December 2018 was £193,527 and £10,137
respectively.
Had the acquisition occurred on 1 January 2018, the Group’s consolidated revenue and profit for the year would not be materially
different to that which has been reported.
The Group has tested the goodwill arising on acquisition and assessed no impairment is required as at 31 December 2018. For the
2018 reporting period, the recoverable amount was determined based on value-in-use calculations which require the use of
assumptions. The calculations use cash flow projections based on management’s estimate of production covering a five year
period, based on current production levels and historical comparable well production profiles, management’s estimate of long term
price and net operating cash flows, and a pre-tax discount rate of 10%.
Reabold Resources Plc Report & Accounts
56
REABOLD RESOURCES PLC
Notes to the financial statements
13.
Investments in equity instruments
At 1 January
Addition at cost
Divestment
Net fair value adjustment
Transfer to investments in associates
Impairment
At 31 December
(a)
Corallian
2018
£’000
550
-
-
56
(556)
(50)
2017
£’000
200
795
(295)
-
-
(150)
-
550
On 1 November 2017, the Company announced that it had entered into two share subscription agreements with Corallian to
subscribe for 1,111,111 ordinary shares in the issued share capital of Corallian at £1.35 per share, representing 35.4% of the then
to be enlarged share capital of Corallian for an aggregate subscription price of £1,500,000, as follows:
i) Reabold had entered into an unconditional share subscription agreement to subscribe for 370,370 ordinary shares in
the issued share capital of Corallian at £1.35 per share (“Round 4”) for an aggregate subscription amount of £500,000
which amount was payable immediately against transfer to Reabold of the Round 4 Shares. The Round 4 Shares
represented 11.8% of the then to be enlarged share capital of Corallian.
ii) Reabold had entered into a conditional share subscription agreement to subscribe for 740,741 ordinary shares in the
issued share capital of Corallian at £1.35 per share (“Round 4A”) for an aggregate subscription amount of £1,000,000,
representing 23.6% of the then to be enlarged share capital of Corallian and which subscription was conditional upon
the joint venture partners in licence P1918 in respect of the Colter appraisal project approving an authorisation for
expenditure for the drilling of the Colter well prior to 30 April 2018, failing which Reabold's obligation to subscribe
for the Round 4A Shares would terminate. On issue of the Round 4A Shares to Reabold, and for so long as Reabold
holds more than 30% of the issued share capital of Corallian, Reabold has the right to appoint a director to the board
of directors of Corallian.
On 1 March 2018, the Company announced that it had signed two further subscription agreements with Corallian. The first
agreement (“Round 5”) was an unconditional subscription for 333,333 new Corallian shares at £1.50 per share for an investment
of £500,000, which was completed in February 2018, giving Reabold an interest of 25.7% of the issued capital of Corallian at
that time. The second agreement (“Round 5A”) gave Reabold the option to subscribe for an additional 333,333 new Corallian
shares at a price of £1.50 per share for an investment of £500,000 at any point up to 6 April 2018. On 3 April 2018, the Company
completed the Round 5A agreement,
At the point of the completion of the Round 5 subscription, Reabold’s prior Round 4 investment in Corallian of 370,370 shares
was assessed as having a fair value of £1.50 per share, giving a value of £555,555 and resulting in an increase in fair value
through P&L of £55,555 during the reporting period. The Round 4 Shares in the value of £555,555 was reallocated from
Investments Available for Sale to Investments in Associates, given Reabold’s significant influence in Corallian had been secured.
(b) Mogul
In June 2015, the Company acquired a 1.2% interest in Mogul Ventures Corp (“Mogul”) a private company focused on natural
resources in Mongolia, principally tin, at a cost of £200,000. In the year ended 31 December 2017, the value of the Company’s
holding in Mogul was impaired by £150,000 to a carrying value of £50,000. It is noted that, in the opinion of the Directors, the
fair value of the Company’s investment in Mogul is challenging to reliably measure given the relatively early stage of
development of the entity, and the limited availability of financial and technical information. In view of Reabold’s interest in
Mogul being a surplus, non-material asset, as at 1 January 2018, the Company’s interest in Mogul was written down to nil (2017:
£50,000), resulting in a revaluation decrease through P&L of £50,000 during the reporting period.
(c)
Tonsley
On 19 April 2017, the Company announced that it had entered into an agreement to buy an initial interest in the advanced San
Jose Lithium-Tin Project in Spain (“the San Jose Project”) for a consideration of AUD$0.5 million (approx. £0.3 million). The
San Jose Project is a Joint Venture between Plymouth Minerals Limited’s (“Plymouth” ASX:PLH) subsidiary, Tonsley Mining
Pty Limited ("Tonsley") and Sacyr, S.A, the IBEX 35 Spanish listed multinational infrastructures and services company. This
investment was in line with Reabold’s strategy to identify strategic mineral opportunities with the potential to add significant
shareholder value.
Reabold Resources Plc Report & Accounts
57
REABOLD RESOURCES PLC
Notes to the financial statements
On 19 April 2017, the Company announced that it had entered into an agreement to acquire an initial interest of approximately
2.0% in Tonsley Mining Pty Limited (“Tonsley”) for a consideration of AUD$0.5 million (approx. £0.3 million). Tonsley owns
rights to earn up to 75% of the San Jose lithium project in Spain. Tonsley has the right to earn a 75% interest in the San Jose
Project by spending EUR1.5 million for a first stage 50%, then €2.5 million for the additional 25%. After an agreed amount of
time between the Parties or in the event no interest is earned by Tonsley (or its subsidiary) in the San Jose Project, there was an
agreed contractual mechanism (by way of options) for the AUD$0.5 million funds to be returned to the Company. On 17 July
2017, the Company announced that it had delivered to Plymouth a Notice of Exercise of Put Option in respect of Reabold’s
interest in Tonsley, whereby Reabold would transfer back to Plymouth its shares in Tonsley in consideration of receipt of
AUD$0.5 million (approx. £0.3 million), payable on 18 July 2017. Whilst the Tonsley investment represented an interesting
opportunity for Reabold, it was decided that this would not form a long term asset for Reabold and therefore that Reabold should
exercise its put option and redeploy the money on other investments.
14.
Investments in associates
The table below presents the Company’s associates, in which it has significant influence:
Registered address
Nature of
business
Class of
shares
Holding
31-Dec-18
Holding
31-Dec-17
Oil & gas
Ordinary
32.9%
15.4%
Associate
Corallian
Energy
Limited
Danube
Petroleum
Limited
Country of
registration
England &
Wales
England &
Wales
Blackstable House,
Longridge, Sheepscombe
Stroud, Gloucestershire
GL6 7QX
3 Waterfront Business
Park, Brierley Hill, West
Midlands DY5 1LX
Oil & gas
Ordinary
33.3%
-
-
Rathlin Energy
(UK) Limited
England &
Wales
11-12 St James’ Square,
London SW1Y 4LB
Oil & gas
Ordinary
37.1%
All of the Company’s associates are unlisted. A breakdown of investments in associates as at 31 December 2018 and 2017 and
the respective changes during the year then ended are summarised as follows:
At 1 January
Transfer from investments in equity instruments
Additions
Share of loss of associates
At 31 December
Group
2018
£’000
-
556
7,179
(165)
7,570
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
-
-
-
-
-
-
556
7,179
(165)
7,570
-
-
-
-
-
The table below presents summarised financial information in respect of the Company’s associates:
Current assets
Non-current assets
Total assets
Current liabilities
Net assets
Revenue
Total comprehensive loss for period
Total comprehensive loss for period of being associate
Reabold’s share of loss
31-Oct-18
Corallian
£’000
31-Dec-18
Danube
£’000
31-Dec-18
Rathlin
£’000
3,642
2,666
6,308
(74)
6,234
48
(423)
(354)
(104)
1,640
4,211
5,851
(7)
5,844
-
(199)
(168)
(28)
5,077
3,709
8,786
(1,416)
7,370
-
(1,340)
(88)
(33)
Reabold Resources Plc Report & Accounts
58
REABOLD RESOURCES PLC
Notes to the financial statements
(a)
Corallian
As outlined in Note 13 above, at the point of the completion of the Round 5, Reabold’s prior Round 4 investment in Corallian of
370,370 shares was assessed as having a fair value of £1.50 per share, giving a value of £555,555 and resulting in a revaluation
increase of £55,555 during the reporting period. The Round 4 investment in the value of £555,555 was reallocated from
Investments Available for Sale to Investments in Associates, given Reabold’s significant influence in Corallian had been secured.
Following the completion of the Round 5 subscription in February 2018 in the amount of £500,000 for 333,333 new Corallian
shares at £1.50 per share, the value of Reabold’s total investment in Corallian at that time was £1,055,554, representing a 25.7%
interest.
On 3 April 2018, the Company completed the Round 5A agreement, which gave Reabold the option to subscribe for an additional
333,333 new Corallian shares at a price of £1.50 per share for an investment of £500,000 at any point up to 6 April 2018.
As at 30 April 2018, no authorisation for expenditure for the drilling of the Colter well had been approved, as required under the
Round 4A subscription. Subsequently, on 25 May 2018, Reabold advised Corallian that it had waived the condition for the Round
4A subscription and proceeded to complete the Round 4A subscription on 28 May 2018 for 740,741 shares at £1.35 per share,
for an investment of £1,000,000, giving the Company an interest of 32.9% in the enlarged issued share capital of Corallian.
On 11 December 2018, the Company announced that Corallian had raised £912,300 by way of an advanced subscription
agreement, with Reabold participating in this fund raise with an investment of £300,000, maintaining its 32.9% interest. The
additional shares to be issued under the advanced subscription agreement are priced at the higher of either a 30% discount to the
price achieved in the next Corallian funding round, or at £1.50 per share (in line with the price per share at the last fund raise) if
no funding round has occurred within 12 months.
As at 31 December 2018, the Company’s interest in Corallian was 32.9%, with a carrying value of £2,855,555.
During the period ended 31 December 2018, the Company’s share of Corallian’s total comprehensive loss amounted to £104,000.
(b)
Danube
On 4 December 2017, the Company announced that it had signed an agreement with Danube, a newly incorporated subsidiary of
ASX listed, ADX Energy Ltd, to invest a total of £1.5 million for a 29% interest in Danube. The investment was conditional on
completion of a transaction between Danube and ADX Energy Ltd, by 28 February 2018, which would result in Danube holding
a 50% interest in the Parta licence in Romania, and a 100% interest in a low-risk appraisal campaign within Parta. The investment
comprised an initial 375,940 new shares to be issued upon completion of the transaction at £1.00 per share. This would be
followed by a further 1,127,819 new shares to be issued upon submission of an Authorisation for Expenditure (“AFE”) for the
first appraisal well at £1.00 per share. On 19 February 2018, the Company agreed to extend the date for completion of the
transaction to 31 March 2018, with completion of the initial investment by the Company of £375,940 taking place on 23 March
2018.
On 24 September 2018, the Company announced the AFE had been submitted and that the Company had completed the second
tranche of Reabold’s investment in Danube in the amount of £1,127,819, giving the Company a 28.6% interest in Danube.
On 3 December 2018, the Company announced that it had exercised options to subscribe for 375,940 shares in Danube at £1.00
per share for a total of £375,940, pursuant to the subscription agreement between the Company and Danube dated 1 December
2017.
As at 31 December 2018, Reabold held a 33.3% interest in Danube, with a carrying value of £1,879,700. Following this
investment, Reabold holds a 33.3% interest in the issued capital of Danube.
During the period ended 31 December 2018, the Company’s share of Danube’s total comprehensive loss amounted to £28,000.
(c)
Rathlin
On 3 December 2018, the Company announced the completion of a 37.08% investment in Rathlin for the consideration of
£3,000,000 in cash. Rathlin is a subsidiary of Calgary-based Connaught. Completion of the deal was conditional on, inter alia,
Connaught agreeing to settle a liability of £33.8 million owed to it by Rathlin and the finalisation of a farm out, by Rathlin, of
Licence PEDL183 (onshore UK) to Union Jack Oil plc and Humber Oil & Gas Ltd resulting in Rathlin retaining a 66.67% equity
interest in Licence PEDL183.
During the period ended 31 December 2018, the Company’s share of Rathlin’s total comprehensive loss amounted to £33,000.
Reabold Resources Plc Report & Accounts
59
REABOLD RESOURCES PLC
Notes to the financial statements
15.
Subsidiaries
The table below presents the Company’s subsidiaries:
Associate
Country of
Registration
Registered Office
Reabold Resourcing
Limited
England &
Wales
20 Primrose Street,
London EC2A 2EW
Gaelic Resources Limited
Isle of Man
Temporary Energy LLC (1)
U.S.A.
14 Albert Street,
Douglas, Isle of
Man, IM1 2QA
5701 Lonetree Blvd,
Rocklin CA 95765
(1) 100% held by Gaelic Resources Limited
The Company’s investment in subsidiaries is as follows:
At 1 January
Additions
Impairment
At 31 December
16.
Loan to subsidiaries
Loan to Temporary Energy LLC
Total
Nature of
business
Holding
company
Holding
company
Holding
31-Dec-18
Holding
31-Dec-17
100%
100%
-
-
-
Oil & gas
100%
Note
12
2018
£’000
-
1,933
-
1,933
2017
£’000
-
-
-
-
Company Company
2017
£’000
2018
£’000
3,692
3,692
-
-
The loan to the subsidiary is interest free and has no fixed repayment date, and is denominated in USD. Repayment of the loan
is subject to the Directors’ assessment of the Group’s requirements and availability of appropriate liquid resources.
The amount of the loan to the subsidiary as at 31 December 2018 was US$4,714,125 (approximately £3,691,851).
17.
Exploration and evaluation assets
The movement on the E&E assets account was as follows:
At 1 January
Acquisitions through business combinations
Additions
Reclassified to oil & gas assets within property, plant & equipment
Written off to exploration costs
Foreign exchange differences
At 31 December
Note
12
18
2018
£’000
-
2,725
1,888
(1,571)
(55)
144
3,131
2017
£’000
-
-
-
-
-
-
-
The acquisition during the reporting period in the amount of £2,725,000 reflects primarily the fair value of the contractual earn-
in rights held by Temporary in oil and gas licences in California.
The additions during the reporting period are in respect of evaluation expenditure by Temporary on the California projects.
Reabold Resources Plc Report & Accounts
60
REABOLD RESOURCES PLC
Notes to the financial statements
The reclassification to oil & gas asset within property, plant & equipment was in respect of the carrying value of expenditure by
Temporary on the California assets which was brought into production on a commercial basis.
In view of the commercial evaluation and development success by Temporary during the reporting period and subsequent to
balance date, the economic analysis supports no impairment charge.
18.
Property, plant and equipment
The movement on the property, plant and equipment assets account was as follows:
Oil & gas assets
Costs:
At 1 January
Additions
At 31 December
Accumulated depreciation:
At 1 January
Charge
At 31 December
Net book value at 31 December
2018
£’000
2017
£’000
-
1,571
1,571
-
(32)
(32)
1,539
-
-
-
-
-
-
-
The additions during the reporting period are in respect of the reclassification to oil & gas asset within property, plant &
equipment was in respect of the carrying value of expenditure by Temporary on the California assets which was brought into
production on a commercial basis.
In view of the commercial evaluation and development success by Temporary during the reporting period and subsequent to
balance date, the economic analysis supports no impairment charge.
19.
Trade and other receivables
Trade receivables
Amounts owed by Group undertakings
VAT receivable
Accrued revenue receivable
Total
Group
2018
£’000
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
222
-
113
90
425
-
-
30
-
30
32
113
-
145
-
-
30
-
30
As outlined in Note 22, the Company has made a provision for the recoverability of the VAT receivable in the amount of £112,947.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. All receivables are
due within one year.
20.
Restricted cash
Restricted cash
Total
Group
2018
£’000
176
176
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
-
-
-
-
-
-
The restricted cash is in respect of surety bonds in the amount of US$250,000 (£176,000) to cover oil and gas drilling activities in
California, as required by regulatory authorities.
Reabold Resources Plc Report & Accounts
61
REABOLD RESOURCES PLC
Notes to the financial statements
21.
Trade and other payables
Trade and other payables
Accruals
Total
Group
2018
£’000
442
79
521
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
65
21
86
71
28
99
65
21
86
The Directors consider that the carrying amount of trade and other payables approximates to their fair value. All liabilities are due
within one year.
22.
Provisions
At 1 January
Utilised in the year
Additions - Provision for VAT
At 31 December
Group
2018
£’000
101
-
83
184
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
-
-
101
101
101
-
83
184
-
-
101
101
The Company has been advised by HRMC that, following a review of its activities, HMRC has assessed that the Company’s
investment activities is not a supply for consideration and as a result the Company cannot claim any Input Tax related to its
investment activities. HMRC had assessed that all expenses claimed since registration in December 2012 are related to investment
activities and that it would be disallowing claimed Input Tax in the amount of £71,129 up to September 2017. The Company has
made a further provision for VAT receivable for the period to December 2017 in the amount of £29,957. For the year ended 31
December 2018, the Company has made a provision for VAT receivable in the amount of £82,990. The Company is in discussions
with HMRC, towards them reversing this assessment and is awaiting a further response from HMRC.
23.
Share capital
Issued at 31 December 2016
On 18 April 2017, placing for cash at 0.5p per share
On 25 September 2017, placing for cash at 0.5p per share
On 25 September 2017, debt for shares at 0.5p per share
On 13 October 2017, placing for cash at 0.5p per share
Issued at 31 December 2017
On 13 March 2018, placing for cash at 0.6p per share
On 4 July 2018, acquisition for shares at 0.625p per share
On 5 September 2018, placing for cash at 0.85p per share
Issued at 31 December 2018
Number of
ordinary
shares
Nominal
Value
£
Total
Value
£’000
320,915,896
£0.001
73,500,000
792,000,000
2,000,000
352,000,000
£0.001
£0.001
£0.001
£0.001
321
73
792
2
352
1,540,415,896
£0.001
1,540
1,291,750,000
420,000,000
568,908,823
£0.001
£0.001
£0.001
1,292
420
569
3,821,074,719
£0.001
3,821
Reabold Resources Plc Report & Accounts
62
REABOLD RESOURCES PLC
Notes to the financial statements
“A” Deferred shares
The Company has in existence at 31 December 2018 and at 31 December 2017, 6,915,896 “A” deferred shares of 1.65p. These
deferred shares do not carry voting rights.
Total ordinary and “A” Deferred shares
The issued share capital as at 31 December 2018 is as follows:
Ordinary shares
“A” Deferred shares
Issued at 31 December 2018
Number of
ordinary
shares
Nominal
Value
£
3,821,074,719
6,915,896
£0.0010
£0.0165
Total
Value
£’000
3,821
114
3,935
The holders of ordinary shares are entitled to one vote per share at the meetings of the Company and to dividends as declared in
proportion to the amounts paid up on the ordinary shares. No shares are of the Company are currently redeemable or liable to be
redeemable at the option of the holder or the Company.
The holders of “A” Deferred shares do not have any right to receive written notice of or attend, speak or vote at any general meeting
of the Company, or to any dividend declared by the Company. They may however be redeemed by the Company at any time at its
option for one penny for all the “A” Deferred shares without obtaining sanction of such holders.
Share Options
During the year 125 million options were granted (2017: 190 million).
Exercise
Price
0.50p
0.75p
1.00p
0.60p
0.90p
1.20p
Grant Date
Vesting Date
Expiry Date
Options in Issue
31 December 2018
Options in Issue
31 December 2017
19 October 2017
19 October 2017
19 October 2017
14 March 2018
14 March 2018
14 March 2018
19 October 2017
19 October 2018
19 April 2019
19 March 2018
14 March 2019
14 September 2019
19 October 2021
19 October 2021
19 October 2021
19 March 2022
19 March 2022
19 March 2022
70,000,000
60,000,000
60,000,000
45,000,000
40,000,000
40,000,000
70,000,000
60,000,000
60,000,000
-
-
-
315,000,000
190,000,000
At 31st December 2018 there were 315 million share options outstanding (2017: 190 million).
Reabold Resources Plc Report & Accounts
63
REABOLD RESOURCES PLC
Notes to the financial statements
24.
Share based payments
Details of share options and warrants granted during the year to Directors over the ordinary shares are as follows:
Issued
during the
year
No.
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
5,000,000
At 1
January
2018
No.
30,000,000
30,000,000
30,000,000
30,000,000
30,000,000
30,000,000
10,000,000
Lapsed /
Exercised
during the
year
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 31
December
2018
No.
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
5,000,000
30,000,000
30,000,000
30,000,000
30,000,000
30,000,000
30,000,000
10,000,000
Exercise
Price
Pence
0.60p
0.90p
1.20p
0.60p
0.90p
1.20p
0.60p
0.50p
0.75p
1.00p
0.50p
0.75p
1.00p
0.50p
Vesting
Date
Expiry
Date
19/03/2018 19/03/2022
14/03/2019 19/03/2022
14/09/2019 19/03/2022
19/03/2018 19/03/2022
14/03/2019 19/03/2022
14/09/2019 19/03/2022
19/03/2018 19/03/2022
19/10/2017 19/10/2021
19/10/2018 19/10/2021
19/04/2019 19/10/2021
19/10/2017 19/10/2021
19/10/2018 19/10/2021
19/04/2019 19/10/2021
19/10/2017 19/10/2021
190,000,000
125,000,000
-
315,000,000
At 1
January
2017
No.
-
-
-
-
-
-
-
Issued
during the
year
No.
30,000,000
30,000,000
30,000,000
30,000,000
30,000,000
30,000,000
10,000,000
Lapsed /
Exercised
during the
year
No.
-
-
-
-
-
-
-
At 31
December
2017
No.
30,000,000
30,000,000
30,000,000
30,000,000
30,000,000
30,000,000
10,000,000
Exercise
Price
Pence
0.50p
0.75p
1.00p
0.50p
0.75p
1.00p
0.50p
-
190,000,000
-
190,000,000
Vesting
Date
Expiry
Date
19/10/2017 19/10/2021
19/10/2018 19/10/2021
19/04/2019 19/10/2021
19/10/2017 19/10/2021
19/10/2018 19/10/2021
19/04/2019 19/10/2021
19/10/2017 19/10/2021
Option Holder
Sachin Oza
Sachin Oza
Sachin Oza
Stephen Williams
Stephen Williams
Stephen Williams
Anthony Samaha
Sachin Oza
Sachin Oza
Sachin Oza
Stephen Williams
Stephen Williams
Stephen Williams
Anthony Samaha
Option Holder
Sachin Oza
Sachin Oza
Sachin Oza
Stephen Williams
Stephen Williams
Stephen Williams
Anthony Samaha
Reabold Resources Plc Report & Accounts
64
REABOLD RESOURCES PLC
Notes to the financial statements
The number and weighted average exercise prices of share options are as follows:
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
2018
Weighted
average
exercise price
0.74
0.89
-
-
0.80
0.61
2018
Number of
options
190,000,000
125,000,000
-
-
315,000,000
175,000,000
2017
Weighted
average
exercise price
-
0.74
-
-
0.74
0.74
2017
Number of
options
-
190,000,000
-
-
190,000,000
70,000,000
The options outstanding at 31 December 2018 have a weighted average contractual life of 3.0 years (2017: 3.8 years).
The closing share price range during the year ended 31 December 2018 was 0.57p to 0.95p (2017: 0.32p to 0.98p).
The options issued during 2018 were all granted on 14 March 2018 and vest in tranches on 19 March 2018, 12 months from grant
and 18 months from grant. The options issued during 2017 were all granted on 19 October 2017 and vest in tranches upon grant,
12 months from grant and 18 months from grant. Should the option holder leave the Board prior to the vesting of their options,
such options will be forfeited.
For the options granted, IFRS 2 "Share-Based Payment" is applicable, and the fair values were calculated using the Black-Scholes
model. The inputs into the model were as follows:
Granted 14 March 2018
Granted 19 October 2017
1.05%
0.72%
120%
120%
4 years
4 years
0.65p
0.77p
Risk free rate
Share price
volatility
Expected life
Share price at
date of grant
Expected volatility was determined by calculating the historical volatility of the Company's share price.
The Company recognised total expenses relating to equity-settled share-based payment transactions during the year of £995,397
(2017: £559,117).
25.
Related party transactions
In addition to the related party transactions disclosed elsewhere, the Company entered into the following related party transactions
in the normal course of operations.
(a)
(b)
(c)
(d)
During the year ended 31 December 2018, the Company incurred fees to Santannos Limited, a company associated with
Anthony Samaha, for provision of accounting and administrative services in the amount of £9,000 (2017: £3,000). As at
31 December 2018, there was nil amount included in accounts payable in respect of these fees (2017: nil).
During the year ended 31 December 2018, the Company provided consulting services to Corallian in the amount of £2,000
(2017: nil). As at 31 December 2018, there was £1,200 included in accounts receivable in respect of these fees (2017: nil).
During the year ended 31 December 2018, the Company provided consulting services to Danube in the amount of £9,000
(2017: nil). As at 31 December 2018, there was £3,600 included in accounts receivable in respect of these fees (2017: nil).
During the year ended 31 December 2018, the Company provided management services to Temporary in the amount of
£23,275 (2017: nil). As at 31 December 2018, there was £23,275 included in accounts receivable in respect of these fees
(2017: nil).
The directors are the key management of the Company (refer to note 9).
Reabold Resources Plc Report & Accounts
65
REABOLD RESOURCES PLC
Notes to the financial statements
26.
Commitments
In October 2018, the Group executed an Authorised for Expenditure in respect to the VG-4 well in the West Brentwood licence in
the amount of US$1.5 million (£1.17 million), of which US$0.34 million (£0.26 million) had been expended up to 31 December
2018, with the balance of the commitment as at 31 December 2018 of US$1.16 million (£0.91 million).
27.
Financial risk management and financial instruments
Overview
The Group has exposure to the following risks from its issue of financial instruments:
• credit risk
• liquidity risk
• market risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes
for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout
these financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
Given the size of the Company, the Directors have not delegated the responsibility of monitoring financial risk management to a
sub-committee of the Board.
The Group’s risk management policies are established to identify and analyse risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group’s activities.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The Group charges partners and third parties for the provision of services and for the sale of oil and gas. Should the
companies holding those accounts become insolvent then these funds may be lost or delayed in their release. Credit risk is managed
through the maintenance of procedures ensuring to the extent possible, that customers and counterparties to transactions are of
sound credit worthiness. Such monitoring is used in assessing receivables for impairment. In respect of the Group’s trade sales,
the Group manages credit risk through dealing only with recognised, creditworthy third parties.
Credit risk relating to the Group’s other financial assets which comprise principally cash and cash equivalents, and restricted cash
arises from the potential default of counterparties. The credit risk on liquid funds is limited because the counterparties are reputable
banks with high credit ratings assigned by international credit-rating agencies.
The carrying amount of financial assets represents the maximum credit exposure, which at the reporting date was:
Cash and bank balances
Trade and other receivables
Restricted cash
Loan to subsidiary
Group
2018
£’000
7,112
425
176
-
Group Company Company
2017
2018
£’000
£’000
2017
£’000
5,307
30
-
-
6,147
145
-
3,692
5,307
30
-
-
The expected credit risk for both the Group and the Company was assessed as not material.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Reabold Resources Plc Report & Accounts
66
REABOLD RESOURCES PLC
Notes to the financial statements
The following are the contractual maturities of financial liabilities, and excluding the impact of netting agreement:
Non-derivative financial liabilities
31 December 2018
Trade and other payables
Accruals
31 December 2017
Trade and other payables
Accruals
Non-derivative financial liabilities
31 December 2018
Trade and other payables
Accruals
31 December 2017
Trade and other payables
Accruals
Notes
Group
Carrying
amount
£’000
Group
Contractual
cash flows
£’000
Group
6 months
or less
£’000
21
21
21
21
442
79
521
65
21
86
442
79
521
65
21
86
442
79
521
65
21
86
Notes
Company
Carrying
amount
£’000
Company
Contractual
cash flows
£’000
Company
6 months
or less
£’000
21
21
21
21
71
28
99
65
21
86
71
28
99
65
21
86
71
28
99
65
21
86
It is not expected that the cash flows in the maturity analysis could occur significantly earlier, or at significantly different amounts.
(c) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while optimising the return.
The Group manages market risks by monitoring market developments and discussing issues regularly, and mitigating actions taken
where necessary.
Foreign currency risk
The Group’s functional currency is Sterling and as such the Group is exposed to foreign exchange movements on monetary assets
and liabilities denominated in other currencies. In addition, the Group’s subsidiary, Temporary, has a functional currency of USD,
exposing the Group to foreign exchange differences, which are taken to reserves. Currently there are no foreign exchange hedge
programmes in place. However, the Group treasury function manages the purchase of foreign currency to meet operational
requirements.
The Group is mainly exposed to currency rate fluctuations of Sterling versus the USD, and measures its foreign currency risk
through a sensitivity analysis considering 10% favourable and adverse changes in market rates on exposed monetary assets and
liabilities denominated in Sterling.
Reabold Resources Plc Report & Accounts
67
REABOLD RESOURCES PLC
Notes to the financial statements
As at 31 December 2018, the exposure of the Group to foreign exchange rates is summarised as follows:
Exposure to USD
Cash and bank balances
Restricted cash
Trade and other receivables
Loan to subsidiary
Trade and other payables
Accruals
Group
2018
£’000
Group Company Company
2017
2018
£’000
£’000
2017
£’000
966
176
304
-
(394)
(51)
1,000
-
-
-
-
-
-
-
-
-
23
3,692
-
-
3,715
-
-
-
-
-
-
-
As at 31 December 2018, if Sterling had gained or lost 10% against the USD, the impact on comprehensive loss would have been
as follows:
Impact on comprehensive loss
+10% GBP/USD
-10% GBP/USD
Group
2018
£’000
(100)
100
Group Company Company
2017
2018
£’000
£’000
2017
£’000
-
-
(372)
372
-
-
Price risk
Price risk arises from uncertainty about the future prices of financial instruments held within the Group’s portfolio. It represents
the potential loss that the Group might suffer through holding market positions in the face of market movements. The investments
in equity stocks of unlisted companies are not traded and as such the prices are more uncertain than those of more widely traded
securities. The Board’s strategy in managing the market price risk inherent in the Group’s portfolio of equity investments is
determined by the requirement to meet the Group’s investment objective. The Directors manage these risks by regular reviews of
the portfolio within the context of current market conditions. Unlisted investments are valued as per accounting policy in these
financial statements.
Interest rate risk
The Group’s exposure to changes in interest rate risk relates primarily to interest-earning financial assets and interest-bearing
financial liabilities. Interest rate risk is managed by the Group on an ongoing basis with the primary objective of limiting the extent
to which net interest expense could be affected by an adverse movement in interest rates.
Capital risk management
The Directors consider the Group’s capital to comprise of share capital and reserves stated on the statement of financial position.
The Group manages its capital to ensure the Group will be able to continue on a going concern on a long term basis while ensuring
the optimal return to shareholders and other stakeholders through an effective debt and equity balance. No changes were made in
the objectives, policies and processes during the current or previous year.
The share capital, including share premium, and reserves totalling £19,313,000 (2017: £5,732,000) provides the majority of the
working capital required by the Group. Management reviews the capital structure and makes adjustment to it in the light of changes
in economic conditions.
Other financial assets and liabilities
The notional amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables,
cash and cash equivalents and trade and other payables) are assumed to approximate their fair value.
Reabold Resources Plc Report & Accounts
68
REABOLD RESOURCES PLC
Notes to the financial statements
Categories of financial instruments
IFRS 9 classification &
measurement
Financial assets:
Cash and cash equivalents
Restricted cash
Receivables
Investment in equity instruments
Loan to subsidiary
Amortised cost
Amortised cost
Amortised cost
FVTPL
Amortised cost
Total financial assets
Financial liabilities:
Other financial liabilities
Total financial liabilities
28.
Post balance sheet events
Group
2018
£’000
Group
2017
£’000
Company
2018
£’000
Company
2017
£’000
7,112
176
425
-
-
5,307
-
30
550
-
6,147
-
145
-
3,692
5,307
-
30
550
-
7,713
5,887
9,984
5,887
Amortised cost
442
442
65
65
71
71
65
65
(a)
(b)
(c)
On 8 February 2019, the Company announced the issue of 1,980,000 new ordinary shares of 0.1 pence each in the Company
to an institutional investor (the “Investor”) pursuant to the transfer of 350,000 common shares in Connaught Oil & Gas
Ltd. (“Connaught”), a private oil and gas company incorporated and registered in the Province of Alberta, Canada, from
the Investor to Reabold (the “Transfer”). Connaught's primary asset is its 35.04% equity holding in Rathlin Energy (UK)
Ltd (“Rathlin”), operator of Licence PEDL 183 (onshore UK). The existing issued share capital of Connaught consists of
66,520,480 common shares. Reabold currently has an approximately 36%. equity interest in Rathlin and, following the
Transfer, has a 0.52%. interest in Connaught.
On 25 February 2019, the Company announced that it had secured an additional equity investment into Corallian, by way
of an Advanced Subscription Agreement, whereby Reabold will invest £750,000, priced at a 30% discount to the next
Corallian fundraise. This investment would cover Corallian's expected costs in relation to the side-track to appraise the
principle Colter oil discovery.
On 9 May 2019, the Company announced that it had agreed to subscribe for a further 375,940 ordinary shares in Danube
at an issue price of £1.00 per share, increasing Reabold’s interest in Danube from 33.3% to 37.5%. In addition, ADX, on
behalf of Danube, has agreed to engage Reabold for a period of 12 months to provide Corporate Advisory Services to
Danube for an annual fee of approximately £75,000.
29.
Parent company profit and loss
As permitted by section 408 of the Companies Act 2006, the profit and loss account of the parent company has not been separately
presented in these accounts. The parent company total comprehensive loss for the year was £2,026,000 (2017: loss £1,152,000).
30.
Ultimate controlling party
In the opinion of the directors there is no controlling party.
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69