Annual Report and
Financial Statements
2020
TomCo Energy plc
For further information visit us online at:
www.tomcoenergy.com or email us at: info@tomcoenergy.com
COMPANY DETAILS
TOMCO ENERGY PLC
Company Numbers
Isle of Man
England & Wales
Country of
Incorporation
6969V
FC022829
Isle of Man
Board of Directors
Malcolm Groat
John Potter
Robert Kirchner
Richard Horsman
Non-Executive Chairman
Chief Executive Officer
Non-Executive Director
Non-Executive Director
Registered Office
1st Floor
Sixty Circular Road
Douglas
Isle of Man IM1 1AE
Broker
Novum Securities Limited
Lansdowne House
57 Berkeley Square
London W1J 6ER
Nominated Adviser
Strand Hanson Limited
26 Mount Row
London
W1K 3SQ
Registrars
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
CONTENTS
Chairman’s statement
Directors’ report
Corporate governance statement
Audit committee report
Remuneration committee report
Independent auditors’ report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Page
1
3
8
14
15
16
21
22
23
24
25
3
CHAIRMAN’S STATEMENT
I am pleased to be delivering my first Chairman’s Statement to the
shareholders of TomCo Energy plc (“TomCo” or the “Company” or, with its
subsidiaries, the “Group”), together with the Annual Report and Financial
Statements for the year ended 30 September 2020.
Market Conditions
It has been an unprecedented year across all global markets. Covid-19 has
cast a dreadful shadow across the world and continues to do at the time of
writing this statement.
TurboShale RF Technology
When the Company issued its 2019 Annual Report, the COVID-19 pandemic
was developing, and the Board decided to postpone the next stage of the
TurboShale field testing. A decision on when to restart the field test
programme is likely to be made in Q2 2021.
Greenfield Energy LLC
In December 2019, the Company signed a non-binding memorandum of
understanding (“MoU”) with Valkor Technology LLC (“Valkor”) to explore the
potential of oil sands situated on the Group’s oil shale leases in the Uintah
Basin, Utah, USA (the “Leases”). Valkor is an international engineering
company that handles procurement, construction and installation, and oil
field operations, operating in the USA, South America and Africa, both
onshore and offshore. It also owns and operates gas and oil fields in
Trinidad, the USA, Turkey and Ukraine. Valkor has been assisting with
design improvements to Petroteq Energy Inc’s (“Petroteq”) closed loop
system for use in the recovery of oil from oil sands (the “Oil Sands
Technology”) and the Company’s joint venture with Valkor, Greenfield (as
defined below), now holds a multi-site licence from Petroteq to utilise the Oil
Sands Technology in the USA.
Based on the results of the preliminary work undertaken in March 2020, and
in accordance with the terms of the MoU, TomCo and Valkor agreed, inter
alia, to fund a Pre-FEED (Front-End Engineering and Design) study. The
initial draft of the study provided sufficient evidence to TomCo’s Board to
justify establishing, in June 2020, a 50/50 joint venture with Valkor, being
Greenfield Energy LLC (“Greenfield”). Greenfield has been established with
the principal aim of developing a FEED for a potential 10,000 barrels of oil
per day (“bopd”) plant consisting of two 5,000 bopd trains utilising the Oil
Sands Technology. The final results of the Pre-FEED study were released
in September 2020, concluding that the likely cost of production from a
10,000 bopd plant would be approximately US$30 per barrel. Steps along
the agreed path have included Greenfield temporarily taking over the
operations and management of Petroteq’s oil sands plant (the “POSP”) in
order to complete certain upgrades and improvements so as to enhance its
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1
reliability and increase its capacity to approximately 500 bopd. In early
December 2020,
the re-configured Petroteq plant works were
completed, and, on 4 January 2021, mining work was started in
preparation for the re-start of the POSP.
Ore-processing began on 10 January 2021 and the POSP operations
will be optimised with the target of producing 250 bopd per single shift
during February 2021.
We expect the FEED to be completed in Q1 2021 following third-party
verification works. A potential site on which to build Greenfield’s first
10,000 bopd plant has been identified and is being assessed which
includes a pre-existing Large Mining Permit and suitable site
infrastructure to enable construction to commence swiftly once funding
has been secured. Although there will be challenges ahead, our firm
objective is to maintain momentum and make significant progress with
this project in the near future.
Corporate
Two equity fund-raises were completed during the financial year, raising
approximately £2.4 million gross. Following the financial year-end, the
Company raised a further £3.5 million gross in November 2020. At the
date of signing this report, TomCo has sufficient cash to fund
Greenfield’s near-term requirements and to cover TomCo’s current
working capital requirements and committed capital expenditure.
A number of Board changes have taken place over the reporting period
and subsequently. Stephen West, who took over from Andrew Jones as
our Chairman during the financial year, stepped down after the financial
year end to pursue other opportunities. After four years of distinguished
service to the Company, and to allow him to concentrate on his other
business interests, Alex Benger also retired as a Non-Executive Director.
Richard Horsman and Robb Kirchner have joined the Board as Non-
Executive Directors. Both are seasoned Directors of companies like
ours, experienced in handling the challenges ahead, and I am delighted
to welcome them to the team.
Outlook and Summary
The Directors would like to thank all shareholders and other stakeholders
for their continued support, and we look forward to making further
progress in the year ahead.
Malcolm Groat
Non-Executive Chairman
17 February 2021
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2
DIRECTORS’ REPORT
The Directors submit their report and the financial statements of the Group for the year ended 30 September
2020.
PRINCIPAL ACTIVITY
The principal activity of the Group is that of deploying technology on its oil shale leases and other
unconventional oil resources for future production.
RISK ASSESSMENT
The Group’s oil and gas activities are subject to a range of financial and operational risks which can significantly
impact on its performance, with the key risks for the year ended 30 September 2020 set out below.
Operational risk
During the financial year, the Company entered into a new Joint Venture with Valkor, an established EPCI, into
which TomCo invested the sum of US$1.625 million in order to produce a Pre-FEED and pay for certain upgrade
works to an existing third-party Oil Sands separation test plant. The planned upgrade works undertaken by
Valkor were intended to enhance the operational reliability and production rate of the plant. In projects of this
nature there are many engineering risks but Valkor, having spent more than 12 months prior to commencement
of the upgrade works investigating the process as the operator, were able to minimise the degree of risk. Further
risks may be encountered during the optimisation process such as the anticipated increased production run
rate not being achieved or from changes in the quality of ore used. Most of such risks can be managed with a
planned increase in throughput and slow incremental increases to the production rate.
The results obtained from the upgrade works will then be utilised to verify the design parameters for a FEED in
respect of a commercial scale plant in the order of 5,000 bopd. If the plant upgrade works do not ultimately
generate suitable data for the FEED design, further works may be required at the test plant to achieve the
engineering design step up for a 5,000 bopd plant operation.
A third-party verification exercise on the process is also planned in order to check both the data from the
upgraded plant and the FEED.
Risks relating to environmental, health and safety and other regulatory standards
The Group’s future extraction activities are subject to various US federal and state laws and regulations relating
to the protection of the environment including the obtaining of appropriate permits and approvals by relevant
environmental authorities. Such regulations typically cover a wide variety of matters including, without limitation,
prevention of waste, pollution and protection of the environment, labour regulations and worker safety.
Furthermore, the future introduction or enactment of new laws, guidelines and regulations could serve to limit
or curtail the growth and development of the Group’s business or have an otherwise negative impact on its
operations. The Group ensures that it complies with the relevant laws and regulations in force in the jurisdictions
in which it operates.
Liquidity and interest rate risks
The Group is ultimately dependent on sources of equity and/or debt funding to develop TurboShale and
Greenfield or any other recovery technology and in turn the Group’s exploration assets and to meet its day-to-
day capital commitments and overheads. Cash forecasts identifying the liquidity requirements of the Group are
produced frequently and are reviewed regularly by management and the Board. This strategy will continually
be reviewed in light of developments with existing projects and new project opportunities as they arise. For
further information regarding the Group’s cash resources and future funding requirements, refer to the ‘Going
Concern’ section below.
Currency risk
Due to the limited income and expenses denominated in foreign currencies, it was not considered cost effective
to manage transactional currency exposure on an active basis. However, as the financial statements are
reported in sterling, any movements in the exchange rate of foreign currencies against sterling may affect the
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3
Group’s statements of comprehensive income and financial position. The Group holds some cash in US dollars
to mitigate the foreign exchange risk and keeps its currency profile under review.
COVID-19 risk
While COVID-19 continues to have a significant negative impact on the global economy, the Directors note that
oil prices have recovered much of the fall since the commencement of the pandemic. The most significant effect
of the pandemic on the Group’s current activities relates to the timing of the resumption of the TurboShale field
tests. The Directors intend to review this again during Q2 2021.The Group’s joint venture activity with respect
to Greenfield is not currently expected to be significantly affected by COVID-19.
Financial instruments
It was not considered an appropriate policy for the Group to enter any hedging activities or trade in any financial
instruments. Further information can be found in Note 20.
RESULTS AND DIVIDENDS
The statement of comprehensive income is set out on page 21. The Directors do not propose the payment of
a dividend (2019: £nil).
REVIEW OF THE KEY EVENTS DURING THE YEAR
TurboShale
There have been no further developments of the TurboShale technology during the financial year. The board
will review the next steps for TurboShale during Q2 2021.
Greenfield Energy LLC
On 4 December 2019, the Company announced the signing of a non-binding memorandum of understanding
with Valkor to explore the oil sands potential across the Group’s oil shale leases within the Uintah Basin, Utah,
USA. Valkor is an international engineering, procurement, construction and installation and oil field operations
company, with operations in the USA, South America and Africa, both onshore and offshore, as well as being
the owner and operator of gas and oil fields in Trinidad, USA, Turkey and the Ukraine. Through its subsidiary,
CrossTrails LLC, Valkor has assisted with the design improvements of Petroteq’s closed loop system for use
in the recovery of oil from oil sands (the “Oil Sands Technology”) and, via Greenfield, has a licence from
Petroteq to utilise the Oil Sands Technology in the USA.
Based on the results of the preliminary work undertaken in accordance with the MoU, TomCo entered into an
Exclusivity Agreement with Valkor, pursuant to which the Company and Valkor agreed:
•
•
•
•
to study the potential to deploy the Oil Sands Technology at a suitable location. A desktop study of the
Group’s Leases determined that, whilst oil sands were present at depth, more suitable third-party sites
with near surface oil sand were situated in the vicinity of the Leases such that these areas will be the
focus of the parties going forward;
to fund immediately a Pre-FEED study, to be undertaken by Valkor and verified by a third party, to
demonstrate the economic viability of the Oil Sands Technology, with a gross budget of US$250,000 to
be funded equally by the parties;
to establish, subject to contract, a joint venture company (the “JV Company”) to pursue the development
of a plant on land yet to be determined; and
to negotiate with Petroteq for a licence to employ the Oil Sands Technology in future oil sands plants
to be developed by the JV Company.
Greenfield Energy LLC was established in June 2020 pursuant to the signing of a joint venture agreement
between TomCo and Valkor (the “JV Agreement”) following the receipt of a draft of the Pre-FEED study.
The results of the draft Pre-FEED study provided the TomCo Board with sufficient comfort to enter into the JV
Agreement to form and regulate the operations of Greenfield in its pursuit of the development of a plant utilising the
Oil Sands Technology. Greenfield is equally owned by TomCo and Valkor, with a Director from each being appointed
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4
to Greenfield’s Board, being John Potter and Steve Byle respectively.
Under the terms of the JV Agreement, the Company has provided initial funding to Greenfield of US$1.5 million, to
enable Greenfield to be able to complete the required upgrades to the POSP and to cover TomCo’s contribution to
the FEED for a 5,000 bopd plant. Valkor is providing the engineering knowhow pertaining to the Oil Sands
Technology required to complete the upgrades and has provided services for the completion of the pre-FEED and
will provide services for the FEED up to a value of, in aggregate, US$375,000.
Prior to the establishment of Greenfield, Valkor had entered into an agreement to take over the management and
operations of the POSP (the “Work Order”), for an initial 12-month period, to ensure the upgrade works could be
completed in as short a period as possible. With the establishment of Greenfield, Valkor transferred the Work Order
to it. The upgrade works were completed post the Company’s financial year end and the POSP restarted. A third-
party engineering firm will now be engaged to verify the process and review the results against the FEED. In addition,
a multi-site licence in respect of the Petroteq technology has been negotiated and entered into by Greenfield, post
the financial year end.
Financing
During the financial year, TomCo completed two equity fund raises involving the issue of, in aggregate,
517,307,692 new ordinary shares and 258,653,846 new warrants, to raise a total of £2.425 million (gross). The
net proceeds were used for the investment into Greenfield and for general working capital purposes.
Since the end of the financial year, there has been a further placing of 777,777,777 new ordinary shares, and
the issue of 388,888,888 new warrants, raising £3,500,000 (gross). These funds have been, or are intended to
be, deployed as loans to Greenfield to assist it in securing a site to further its development work and secure a
multi-site licence for deployment of the Oil Sands Technology, as well as general working capital for the Group.
Other than the funds advanced since the year-end as loans to Greenfield (US$500,000), the Group is not
contractually committed at present to any further expenditure in respect of Greenfield or TurboShale. The timing
and quantum of further expenditure on these projects will depend in part on the availability of additional funding
from future fundraisings.
As at 9th February 2021, the Company had cash of approximately £2.45 million and management’s cash flow
forecasts indicate that the Group has sufficient funds to meet its currently foreseeable working capital
requirements through to at least the end of June 2022 as detailed further below undergoing Concern and in
Note 1.1 to the financial statements.
Directors
The Directors who served on the Board during the year to 30 September 2020 and to date were as follows:
Stephen West (appointed 17 February 2020; resigned 30 September 2020)
Andrew Jones (resigned 16 March 2020)
Malcolm Groat
John Potter
Alexander Benger (resigned 30 September 2020)
Richard Horsman (appointed 1 November 2020)
Robert Kirchner (appointed 1 November 2020)
Directors’ interests in the ordinary shares of the Company, including family interests, as at 30 September 2020
were as follows:
30 September 2020
30 September 2019 (or date of appointment)
Ordinary shares
of nil par value
11,887
Share
warrants
-
Share options
2,380,952
Ordinary shares
of nil par value
11,887
Share
warrants
-
Share
options
380,952
3,076,923
-
-
3,076,923
-
-
M. Groat
S. West
(resigned 30
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5
September
2020)
J. Potter
A. Benger
(resigned 30
September
2020)
26,500
18,293
3,133,603
-
-
-
7,714,285
26,500
-
1,714,285
2,380,952
12,476,189
18,293
3,133,603
-
-
380,952
2,476,189
Details of the remuneration, share warrants and share options can be found in the Remuneration Committee
Report and Notes 6, 17 and 19 to the financial statements.
Payments of payables
The Group’s policy is to negotiate payment terms with its suppliers in all sectors to ensure that they know the
terms on which payment will take place when the business is agreed and to abide by those terms of payment.
Going Concern
The Directors have prepared cash flow forecasts for the period to 30 June 2022. Those forecasts, which include
any capital expenditure committed at the date of this report, indicate that the Group has sufficient resources to
continue in operational existence for the foreseeable future,
It is possible that additional capital expenditure beyond that committed at the date of this report will be necessary
in order to maximise the opportunities presented by TurboShale and Greenfield. Any such additional
expenditure would be subject to funding, in whole or in part, via additional debt or equity or a combination of
both.
The Directors note that COVID-19 has had a significant negative impact on the global economy and oil prices
have been volatile, which may mean it is harder to secure additional funding than it has historically been.
Notwithstanding this, the Directors have a reasonable expectation based on successful recent fundraisings,
that they can secure any additional funding that might be required.
Directors’ responsibilities
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the
Group’s transactions and disclose, with reasonable accuracy at any time, the financial position of the Group
and enable them to ensure that financial statements may be prepared, in accordance with the Isle of Man
Companies Act 2006. They are also responsible for safeguarding the assets of the Group and for taking steps
for the prevention and detection of fraud and other irregularities.
The Directors are required to prepare financial statements in accordance with the rules of the London Stock
Exchange for companies with securities trading on the AIM market. In accordance with those rules, the Directors
have elected to prepare the Group’s financial statements in accordance with International Financial Reporting
Standards (IFRSs), as issued by the International Accounting Standards Board. The Directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the
Group and of the profit or loss of the Group for that year. In preparing these financial statements, the Directors
are required to:
•
•
•
•
consistently select and apply appropriate accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs 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
state that the Group has complied with IFRS, subject to any material departures disclosed and explained
in the financial statements.
The Directors confirm that they have complied with these requirements, and, having a reasonable expectation
that the Group has adequate resources to continue in operational existence for the foreseeable future, have
continued to adopt the going concern basis in preparing the financial statements.
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6
Auditors
All the current Directors have taken all the steps that they ought to have taken to make themselves aware of
any information needed by the Company’s auditors for the purposes of their audit and to establish that the
auditors are aware of that information. The Directors are not aware of any relevant audit information of which
the auditors are unaware.
BDO LLP have expressed their willingness to continue in office and a resolution to re-appoint them will be
proposed at the annual general meeting.
By order of the Board
John Potter
CEO
17 February 2021
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7
CORPORATE GOVERNANCE STATEMENT
As Chairman, I am pleased to present the Company’s Governance Statement under the QCA Corporate Governance
Code (the “QCA Code”). Establishing effective corporate governance structures that evolve with the business and
protect shareholder value is a key element of my role, together with the Board as a whole. Set out below are details
of the Company’s governance framework benchmarked against the QCA Code principles.
The Board of Directors of TomCo (the “Board”) monitors the business affairs of the Company and its subsidiaries on
behalf of its shareholders. The Board currently consists of the Chief Executive Officer and three Non-Executive
Directors. None of the Non-Executive Directors have previously held an executive position with the Company. The
Directors have responsibility for the overall corporate governance of the Company and recognise the need for the
highest standards of behaviour and accountability. The Directors are committed to the principles underlying best
practice in corporate governance and have adopted the QCA Code.
This statement explains, at a high level, how the QCA Code is applied by the Company and how its application
supports the Company’s medium to long-term success. Further information on the application of the QCA Code can
be found on the Company’s website at https://tomcoenergy.com/investors/governance/.
The Board is responsible for the stewardship of the Company through consultation with the management of the
Company. Management represents the Executive Director. Any responsibility that is not delegated to management
or to the committees of the Board remains with the Board, subject to the powers of shareholder meetings. The
frequency of Board meetings, as well as the nature of agenda items, varies depending on the state of the Company’s
affairs and in light of opportunities or risks which the Company faces. Members of the Board are in frequent contact
with one another and meetings of the Board are held as deemed necessary.
Statement of compliance with the QCA Code
Throughout the year ended 30 September 2020, the Company has been in compliance with the provisions set out in
the QCA Code.
Application of the QCA Code principles
The Company has applied the principles set out in the QCA Code, by complying with it as reported above. Further
explanations of how the principles have been applied is set out below.
Principle One – Business Model and Strategy
TomCo is an oil exploration and development company focused on using innovative technology to unlock
unconventional hydrocarbon resources, initially in Utah, USA.
Its objective is to become the leading development company in the use of RF technology in the extraction of oil and
gas from oil shale and to commercialise its current oil shale assets.
The Board believes that the RF technology, held through TurboShale in which the Company has an 80% interest,
will benefit from being economically attractive, carrying significantly lower costs than other methods of retorting and
will be environmentally benign. The Board believes this will prove to be a disruptive technology and one with the
potential to unlock TomCo’s oil shale assets. Details of key operational and strategic risks that impact the delivery of
the future strategy are set out in the Directors’ Report together with mitigating actions.
In order to diversify its interests, in December 2019, TomCo announced a project in conjunction with the global EPCI
company, Valkor LLC, to develop a licensed scalable modular production plant that could be used to cost effectively
extract oil from the oil sands. TomCo announced a formal JV with Valkor on 19 June 2020, creating Greenfield
Energy LLC, to make certain upgrades at Petroteq’s existing oil sands plant, with the ultimate objective of developing
a FEED for a 10,000 bopd plant based on Petroteq’s oil sands technology. The initial upgrade implementation phase
has been completed and the Board is currently examining the possibility with Valkor of securing a site for the
potential future construction of a 10,000 bopd plant.
Principle Two – Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communications and having constructive dialogue with its shareholders.
Shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the
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Corporate Governance Statement
Company and management.
All shareholders are encouraged to attend and participate in all shareholder meetings called by the Company, in
particular its Annual General Meeting (AGM), subject to Covid-19 related restrictions. Investors also have access to
current information on the Company and the Group through its website at: www.tomcoenergy.com.
Principle Three – Considering wider stakeholder and social responsibilities
The Board recognises that the long-term success of the Group is reliant upon the efforts of the employees of the
Group, its partners, consultants, contractors, suppliers, regulators and other stakeholders. The Board have put in
place a range of processes and systems to ensure that there is close oversight and contact with its key stakeholders.
The Group is subject to oversight by a number of different U.S. State and other regulatory bodies, who directly or
indirectly are involved with the permitting and approval process of its oil and gas operations in Utah, including those
conducted by Greenfield. Additionally, given the nature of the Group’s business, including the activities of its joint
venture, there are other parties who, whilst not having regulatory power, nonetheless have an interest in seeing that
the Group conducts its operations in a safe, environmentally responsible, ethical and conscientious manner.
The Group makes all reasonable efforts, directly or through its advisers, to engage in and maintain active dialogue
with each of these governmental and non-governmental bodies, to ensure that any issues faced by the Group,
including but not limited to regulations or proposed changes to regulations, are well understood and ensuring to the
fullest extent possible that the Group is in compliance with all appropriate regulations, standards and specific
licensing obligations, including environmental, social and safety aspects, at all times.
Principle Four – Risk Management
In addition to its other roles and responsibilities, the Board is responsible for ensuring that procedures are in place
and are being implemented effectively to identify, evaluate and manage the significant risks faced by the Group.
As a result of the process described above, a number of risks have been identified. The principal risks and the manner
in which the Company and its Board seek to mitigate them are set out below. The Board reviews the principal risks
facing the business as part of its meetings through the year and changes to those risks as the Company develops.
Where risks change or new risks are identified the Board implements risk management strategies as applicable.
Risk
Operational risks
Comment
See Directors’ Report.
Mitigation
The Company is reducing its reliance on one recovery
method with the development of TurboShale and its RF
technology, together with the formation of Greenfield.
The Company has engaged with established contractors
to carry out the various elements of its projects. The
Board carefully monitors performance and the results of
work being carried out on an ongoing basis.
The Group relies on its JV partner to manage the
engineering and operational risks of the works being
undertaken by Greenfield at the test site. With travel to
the USA still possible, although difficult, on site checks
can still be made by the Board. If travel to the USA were
to be prohibited altogether due to COVID-19 the Group
will be solely reliant on its JV partner to manage the
operational risks.
Environmental, health
and safety and other
regulatory standards
See Directors’ Report.
The Company has engaged leading advisers to assist it
in securing relevant permits or licences to operate.
The Company maintains ongoing oversight of health and
safety and environmental compliance.
Liquidity risk
See Directors’ Report
The Company maintains a detailed cashflow forecast and
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9
Corporate Governance Statement
including ‘Going Concern’
section.
carefully monitors expenditure and may seek to raise
additional funding as required and as referred to in Note
1.1.
Currency risk
See Directors’ Report.
The Company aims to manage currency exposures by
holding funds in the applicable currency to match
anticipated expenditure.
The Board consider that an internal audit function is not necessary or practical due to the size of the Group and the
close day to day control exercised by the Executive Director. However, the Board will continue to monitor the need
for an internal audit function. The Executive Director has established appropriate reporting and control mechanisms
to ensure the effectiveness of the Group’s control systems for the size of the business and its activities. The Board
obtains regular updates on risks from the Executive Director, which allows it to monitor the effectiveness of risk
management and through its regular engagement and review of reporting on areas such as the status of the
Company’s projects, budgets, results and cash flow position of the Company it considers the effectiveness of controls
on an ongoing basis.
Principle Five – A Well-Functioning Board of Directors
The Board currently comprises the Chief Executive, John Potter, and three independent Non-Executive Directors,
Malcolm Groat, Richard Horsman and Robert Kirchner.
Biographies for each of the current Directors are set out on the Company’s website. Executive and Non-Executive
Directors are subject to re-election usually at the Company’s Annual General Meeting, at intervals of no more than
three years.
The Board meets on a regular basis, typically at least once a month.
The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and corporate
actions. As such, the Company has established separate Audit and Remuneration Committees.
The Audit Committee comprises Richard Horsman (Chairman) and Malcolm Groat. The Audit Committee meets at
least twice a year to consider the integrity of the financial statements of the Company, including its annual and interim
accounts; the effectiveness of the Company’s internal controls and risk management systems; auditor reports; and
terms of appointment and remuneration for the auditor.
The Company’s Remuneration Committee comprises Robert Kirchner (Chairman) and Malcolm Groat. The
Remuneration Committee meets from time to time, but not less than once a year, to review and determine, amongst
other matters, the remuneration of Executives on the Board and any share incentive plans of the Company.
The QCA Code recommends that the Chairman must have adequate separation from the day-to-day business to be
able to make independent decisions. Malcolm Groat is the Company’s Non-Executive Chairman and the Board
believe that he has adequate separation from the day-to-day business of the Company to be able to make
independent decisions. As the Board is comprised of only four members, one of whom is Executive and three of
whom are independent Non-Executive Directors, including the Chairman, the Board does not believe it is currently
necessary to appoint a senior independent director.
The Chief Executive is a full-time employee of the Company. Whilst each of the Non-Executive Directors are
considered to be part time, they are expected to provide as much time to the Company as is required. The attendance
record of the Directors at Board and committee meetings held during the year ended 30 September 2020 was as
follows [see next page]:
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10
Corporate Governance Statement
Meetings held
Attendance:
Stephen West (appointed 17 February 2020; resigned 30 September
2020)
John Potter
Alex Benger (resigned 30 September 2020)
Malcom Groat
Andrew Jones (resigned 16 March 2020)
Principle Six – Appropriate Skills and Experience of the Directors
Main
Board
11
Audit
Committee
2
Remuneration
Committee
2
9
11
11
11
2
2
2
2
2
The Board believes that the current balance of skills held by the Board as a whole, reflects a very broad range of
commercial and professional skills across geographies and industries and each of the Directors has previous
experience of public markets.
The Board believes that the Directors are well suited to the Company’s fundamental objective of enhancing and
preserving long-term shareholder value and ensuring that the Group conducts its business in an ethical and safe
manner. The Board is considered to be of a sufficient number to provide more than adequate experience and
perspective to its decision-making process and, given the size and nature of the Group, the Board does not consider
at this time that it is appropriate to increase the size of the Board or amend its composition.
As the Board is not currently anticipating any change to its size or composition, it has not yet implemented a written
policy regarding the identification and nomination of female directors. In the event that one of the existing members
of the Board stands down from their current position, the Company will, at that time, give further consideration to the
specific selection of a female member of the Board and the adoption of a formal policy relating to the positive
appointment of additional female members of the Board for future opportunities.
The Board is responsible for: (a) ensuring that all new Directors receive a comprehensive orientation, that they fully
understand the role of the Board and its committees, as well as the contribution individual directors are expected to
make (including the commitment of time and resources that the Company expects from its directors) and that they
understand the nature and operation of the Group’s business; and (b) providing continuing education opportunities
for all directors, so that individuals may maintain or enhance their skills and abilities as directors, as well as to ensure
that their knowledge and understanding of the Group’s business remains current.
Given the size of the Company and the in-depth experience of its Directors, the Board has not deemed it necessary
to develop a formal process of orientation for new Directors but encourages all its Directors to visit the Group’s
operations to ensure familiarity and proper understanding.
Skills & Experience of Board Members
Malcolm Groat
Malcolm is a Chartered Accountant and has a wide range of experience in corporate life, with roles as Chairman,
Non-Executive Director, Chairman of Audit Committees, CEO, COO and CFO for a number public companies. He is
an adviser on compliance and governance, strategy and operational improvement, and managing the risks of rapid
change.
John Potter
John is an accomplished Chief Executive and project manager with many years’ experience working within the energy
sector. John brings a wide range of skills, knowledge and industry connections. His proficiencies in understanding
and identifying best technologies in projects and his proven abilities in developing relationships with stakeholders,
including operators, politicians, financiers, technology providers and regulators, are well proven and have brought
great value to the companies he has previously worked with.
____
11
Corporate Governance Statement
Robert Kirchner
Robb is an experienced board and oil industry executive, having spent over 30 years in senior roles in the industry.
In recent years, he has successfully brought several new energy technologies to the market. He is currently CEO
of Cornerstone Energy Africa Ltd, an Africa focused oil exploration and production company, and Managing Director
of BCI International, a consulting and financial advisory business focused on the energy sector. His previous roles
include being COO of African Power Corporation; CFO and Deputy CEO of Kungur Oilfield Equipment and Services;
and CEO of First Africa Oil plc and Deputy CEO of Sibir Energy plc, when those companies were quoted on AIM.
Robert also spent 13 years with ExxonMobil Corporation from 1988
to 2001 and worked extensively
across Africa and the FSU. He has dual US/UK nationality.
Richard Horsman
Richard is an experienced public company director and is currently Non-Executive Chairman of Toople plc, a main
market listed provider of bespoke telecom solutions. He is also Executive Chairman of privately held Gardien Group.
He was previously senior independent Non-Executive Director of Plethora Solutions Holdings plc and CEO of Cybit
Holdings plc, both on AIM. During his tenure at Cybit the company grew, from inception, to revenues of £25 million
and went through multiple acquisitions. Cybit was acquired in a deal with a US based private equity firm at over a
100% premium to the prevailing market price. Richard was also previously Chairman and CEO of Atego Group, a
private company providing mission and safety critical software and consulting services to the aerospace, military and
automotive sectors.
Principle Seven – Evaluation of Board Performance
The Board has determined that it shall be responsible for assessing the effectiveness and contributions of the Board
as a whole and its committees (which currently comprise the Audit Committee and the Remuneration Committee).
The small size of the Board allows for open discussion. The Chairman has regular dialogue with the Chief Executive
whereby the Board’s role and effectiveness can be considered.
No formal assessments have been prepared in the year. However, the Board assesses its effectiveness on an
ongoing basis. The Board will keep this matter under review and especially if either the size of the Board or the
number of committees increases, which in turn may require a more formalised assessment and evaluation process
to be established to ensure continued effectiveness.
Principle Eight – Corporate Culture
The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Group
as a whole and that this will impact the performance of the Group. The Board is very aware that the tone and culture
set by the Board will greatly impact all aspects of the Group. The corporate governance arrangements that the Board
has adopted are designed to ensure that the Group 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 Group’s activities is centred upon what needs to be an open and respectful dialogue with partners,
suppliers, consultants and other stakeholders. Therefore, the importance of sound ethical values and behaviour is
crucial to the ability of the Group to successfully achieve its corporate objectives.
The Directors consider that, at present, the Group has an open culture facilitating comprehensive dialogue and
feedback and enabling positive and constructive challenge.
Principle Nine – Maintenance of Governance Structures and Processes
Ultimate authority for all aspects of the Group’s activities rests with the Board, with the responsibilities of the
Executive Director 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 and compliance with the QCA Code, while
management of the Group’s business and primary contact with shareholders has been delegated by the Board to
the Chief Executive Officer.
Non-Executive Directors
The Board evaluates its performance and composition on a regular basis and will make adjustments as and when
____
12
Corporate Governance Statement
indicated. When assessing the independence of each Non-Executive Director, length of service is one of the
considerations. The Board will, when assessing new appointments in the future, consider the need to balance the
experience and knowledge that each independent director has of the Group and its operations, with the need to
ensure that independent directors can also bring new perspectives to the business.
In accordance with the Isle of Man 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.
Principle Ten – Shareholder Communication
The Board is accountable to the Company’s shareholders and, as such, it is important for the Board to appreciate
the aspirations of the shareholders and equally that the shareholders understand how the actions of the Board and
short-term financial performance relate to the achievement of the Group’s longer-term goals.
The Board reports to the Company’s shareholders on its stewardship of the Group through the publication of interim
and final financial results. The Company announces significant developments which are disseminated via various
the Company maintains a website
outlets
(www.tomcoenergy.com) on which RNS announcements, press releases, corporate presentations and the Report
and Financial Statements are available to view.
including, before anywhere else, RNS.
In addition,
Enquiries from individual shareholders on matters relating to the business of the Group are welcomed. Shareholders
and other interested parties can subscribe to receive notification of news updates and other documents from the
Company via email.
The Annual General Meeting, and other meetings of shareholders that may be called by the Company from time to
time, provide an opportunity for communication with all shareholders and the Board encourages shareholders to
attend and welcomes their participation. 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.
Malcolm Groat
Non-Executive Chairman
17 February 2021
____
13
AUDIT COMMITTEE REPORT
Overview
The Committee met twice during the year. The external auditor also attended the meetings at the invitation of the
Committee Chairman.
Malcolm Groat was appointed Chairman of the Committee by the Board, with the other Committee member being
Alex Benger. Further to the Board changes in late 2020, the Committee currently comprises Richard Horsman
(Chairman), Robert Kirchner and Malcolm Groat.
Financial Reporting
The Committee monitored the integrity of the interim and annual financial statements and reviewed the significant
financial reporting issues and accounting policies and disclosures in the financial reports. The external auditor
attended the Committee meetings as part of the full year and interim accounts approval process. The process
included the consideration of reports from the external auditor identifying the primary areas of accounting judgements
and key audit risks identified as being significant to the 2020 accounts.
Audit Committee Effectiveness
The Board considers the effectiveness of the Committee on a regular basis but not as part of a formal process.
External Audit
The Committee is responsible for managing the relationship with the Company’s external auditor, BDO LLP.
The objectivity and independence of the external auditor is safeguarded by reviewing the auditor’s formal
declarations, monitoring relationships between key audit staff and the Group and reviewing the non-audit fees
payable to the auditor. Non-audit services are not performed by the auditor. During the year, audit fees of £33,500
(2019: £31,000) were paid to BDO LLP.
Internal Audit
The Committee considered the requirement for an internal audit function. The Committee considered the size of the
Group, its current activities and the close involvement of senior management. Following the Committee’s review, it
did not deem it necessary to operate an internal audit function during the year.
Richard Horsman
Chairman, Audit Committee
17 February 2021
____
14
REMUNERATION COMMITTEE REPORT
This report is on the activities of the remuneration committee for the financial year ended 30 September 2020.
Following the appointment of Robert Kirchner and Richard Horsman to the Board in late 2020, the Remuneration
Committee now comprises Robert Kirchner (Chairman), Richard Horsman and Malcolm Groat. The Remuneration
Committee meets from time to time, but not less than once a year, to review and determine, amongst other matters,
the remuneration of the Executive(s) on the Board and any share incentive plans of the Company.
The Group has no employees other than the Directors; whose emoluments comprise fees paid for services. The
amounts for their services are detailed below:
M Groat
S West (appointed 17 February 2020;
resigned 30 September 2020)
J Potter
A Benger (resigned 30 September 2020)
A Jones (resigned 16 March 2020: 2020
figure includes compensation of
£150,000)
Salaries
2020
£’000
Salaries
2019
£’000
20
27
91
20
250
18
-
74
18
98
As detailed in Note 19, the Company has in place a share option scheme for its Directors.
The Committee met twice during the year.
Robert Kirchner
Chairman, Remuneration Committee
17 February 2021
____
15
Independent auditor’s report to the members of TomCo
Energy plc
Independent auditor’s report to the members of TomCo Energy Plc
Opinion
We have audited the financial statements of TomCo Energy Plc (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 30 September 2020 which comprise the consolidated statement of comprehensive
income, the consolidated statement of financial position, the consolidated statement of changes in equity and the
consolidated statements of cash flows and notes to the financial statements including a summary of significant
accounting policies. The financial reporting framework that has been applied in the preparation of the financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the International
Accounting Standards Board.
In our opinion the financial statements:
•
•
give a true and fair view of the state of the Group’s affairs as at 30 September 2020 and of its loss for the
year then ended; and
have been properly prepared in accordance with IFRSs as adopted by the International Accounting
Standards Board;
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 Group and the Parent Company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
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 and 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. The following matters were identified as key audit matters:
Key Audit Matter
Carrying value of Exploration and Evaluation assets
As detailed in Notes 8 and 9 to the financial statements, the Group has
recognised significant assets, relating to the exploration and evaluation of the
Group’s oil shale licences, including TurboShale. The Directors are required to
assess these exploration and evaluation assets for indicators of impairment at
each reporting date.
____
16
How we
addressed the
Key Audit Matter
in the Audit
The assessment of whether or not there are any indicators of impairment is
described in the Group’s accounting policies in note 1.9 and includes making
estimates and judgments. These estimates and judgements are set out in note
1.1 and the subjectivity of these estimates and judgements along with the
material carrying value of the assets make this a key area of focus for the
audit.
We have assessed management’s review of whether there are any indicators
of impairment and our procedures included the following:
• Reviewing the licence documentation to check that the licences
remained valid and to confirm the expiry dates.
• Where licences are due to be renewed in the near future, making
enquiries of Management to confirm no issues are foreseen with the
renewal process.
• Considering the Competent persons report on contingent and
prospective resources to confirm that it does not suggest there are
any indicators of impairment for the project.
• Assessing the independence and competence of the Competent
person as management’s expert.
• Making specific enquires of management, reviewing market
announcements and reviewing Board minutes to establish whether
there was any evidence that the Group did not plan to proceed with
the exploration and evaluation of its assets.
• Making enquiries of management to understand the impact of COVID
19 and oil prices on the future of the project and challenging
management on whether these factors are indicators of impairment.
We also evaluated the adequacy of the disclosures provided within the
financial statements in relation to the impairment assessment against the
requirements of the accounting standards.
Key observations
Based on the work performed we have no matters to communicate in respect
of management’s assessment of the carrying value of the group’s exploration
and evaluation assets.
Key Audit Matter
Accounting treatment of the investment in Greenfield Energy LLC
As detailed in Note 10 to the financial statements, the Group acquired a 50%
shareholding in Greenfield, and entered into a shareholder agreement with
Valkor, the other 50% shareholder, during the year. As disclosed in note 1.1,
this investment has been assessed under IFRS 11 and has been determined
to be a joint venture.
The determination of whether or not Greenfield is a jointly controlled venture
depends on the terms of the shareholder agreement and requires judgement.
The expenditure incurred by Greenfield following the investment by the Group
relates to the development and upgrade to the Petroteq Oil Sands Plant.
Determining the accounting treatment of this expenditure requires judgement,
specifically whether or not the costs are eligible for capitalisation in
accordance IFRS. As disclosed in note 1.1, Management has capitalised the
development costs based on the conclusion that the Greenfield project has
passed the research phase and is in the development phase. Management
deemed that the results of the Pre-Feed study were sufficient to demonstrate
the project meets the definition of development.
The judgments involved in making these assessments made this a key area of
focus for the audit.
____
17
How we
addressed the
Key Audit Matter
in the Audit
We have assessed management’s judgements regarding the determination
that Greenfield is a joint venture and our audit procedures included:
• Reviewing the Shareholders’ Agreement and challenging
management on the key terms to determine whether these are
indicative of Joint control and meet the definition of a Joint Venture.
We reviewed management’s assessment which concluded that the Greenfield
project is in the development phase, and therefore the costs relating to the
development are capitalised within Greenfield, and in doing so our work
included:
• Substantively testing a sample of costs within Greenfield and
corroborating them to supporting documentation.
• Corroborating the basis for Management’s conclusions to supporting
evidence such as the Pre-FEED study which supported
Management’s conclusion that the project is commercially viable.
• Challenging management on the classification of assets contributed to
the joint investment and determining whether these met the definition
of development costs under IAS 38 ‘intangible assets’.
We also evaluated the adequacy of the disclosures provided within the
financial statements in relation to the investment against the requirements of
the accounting standards.
Key observations
Based on the work performed we have no matters to communicate in respect
of management’s assessment of investment or the share of the loss
recognised in the group financial statements.
Key Audit Matter
Going concern
How we
addressed the
Key Audit Matter
in the Audit
As detailed in note 1.1 to the financial statements there are significant
judgments made by management in determining whether the group can
continue trading as a going concern. Given the significant nature of these
judgements along with the material impact this assessment has on the
financial statements, we have considered this to be a key area of focus for the
audit.
We have reviewed management’s assessment of going concern and our audit
procedures in response to this key audit matter included:
• Reviewing the latest cash flow forecasts for the group, which covered
the period to June 2022. Our work included assessing the forecast
cash outflows again historical data and publicly stated plans for the
future development of the exploration assets and joint venture.
• Verifying the receipt of the proceeds of the equity placing post the
year-end.
• Challenging management on their ability to raise further financing in
light of COVID-19 and considering the future impact this could have
on further fundraises.
• Reviewing management’s stress test on the cash flow forecasts to
understand whether these scenarios gave rise to a material
uncertainty.
• Reviewing the disclosures in note 1.1 to the financial statements
against the requirements of the accounting standards to check that the
disclosures reflect the going concern position of the Group.
Key observations
Our observations in respect of going concern are set out in the Conclusions
relating to going concern section above.
____
18
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial, as we also take
account of the nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Group materiality was set at £160,000 (2019: £150,000) being 1.5% of total assets. We considered total assets to
be the most significant determinant of the Group’s financial performance by users of the financial statements.
Performance materiality is the application of materiality at the individual account or balance level set at an amount to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole. Performance materiality was set at £120,000 (2019:
£112,500), which represents 75% of the above materiality level. The level of performance materiality was set after
considering a number of factors including the expected value of known and likely misstatements and management’s
attitude towards proposed adjustments.
Component materiality ranged from £80,000 to £144,000 (2019: £75,000 to £130,000).
We agreed with the Audit Committee that we would report to them individual audit differences identified during the
course of our audit in excess of £3,200 (2019: £3,000). We also agreed to report differences below this threshold
which warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our group audit scope focused on the group’s principle operating locations, being the United Kingdom and USA. We
determined there to be three significant components, TomCo Energy Plc, Greenfield Energy LLC and TurboShale
Inc.
The group audit team carried out a full scope audit on all entities and performed all the work necessary to issue the
group audit opinion including undertaking all of the audit work on the key audit matters and other risk areas.
Other information
The directors are responsible for the other information and financial statements. 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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, within the directors’ report, 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 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 company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
____
19
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.
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 our report
This report is made solely to the Parent Company’s Members, as a body, in accordance with our engagement letter
dated 23 October 2020. Our audit work has been undertaken so that we might state to the Parent Company’s
Members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and
the Parent Company’s Members as a body, for our audit work, for this report, or for the opinions we have formed.
BDO LLP
Chartered Accountants
London, UK
17 February 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
____
20
Consolidated Statement of Comprehensive Income
for the financial year ended 30 September 2020
Note
£’000
2
2
2
4
3
10
5
18
10
18
18
Revenue
Cost of sales
Gross loss
Administrative expenses
Operating loss
Finance income/(costs)
Share of loss of joint venture
Loss on ordinary activities before taxation
Taxation
Loss for the year attributable to:
Equity shareholders of the parent
Non-controlling interests
Items that may be reclassified
subsequently to profit or loss
Exchange differences on translation of
foreign operations
Items that will not be reclassified
subsequently to profit or loss
Fair value gain on non-derivative equity
investment
Other comprehensive income for the year
attributable to:
Equity shareholders of the parent
Non-controlling interests
Other comprehensive income
Total comprehensive loss attributable to:
Equity shareholders of the parent
Non-controlling interests
Total comprehensive loss
Loss per share attributable to the equity
shareholders of the parent
2020
£’000
-
-
-
(1,031)
(1,031)
1
(40)
(1,070)
-
(1,070)
£’000
2019
£’000
-
-
-
(778)
(778)
(4)
-
(782)
-
(782)
(1,028)
(42)
(749)
(33)
(1,070)
(782)
(350)
-
408
2
417
(7)
(350)
410
(1,420)
(332)
(40)
2020
Pence
(372)
2019
Pence
per share
per share
(356)
6
(1,384)
(36)
Basic & diluted loss per share
7
(0.30)
(0.73)
The Notes on pages 25 to 42 form part of these financial statements.
____
21
Consolidated Statement of Financial Position
as at 30 September 2020
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment in joint venture
Other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
Net current assets
TOTAL LIABILITIES
Total net assets
Shareholders’ equity
Share capital
Share premium
Warrant reserve
Translation reserve
Retained deficit
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Note
8
9
10
11
11
12
13
15
16
17
18
Group
2020
£’000
8,834
411
1,224
26
10,495
118
334
452
10,947
(215)
(215)
237
(215)
10,732
-
29,222
1,288
282
(19,887)
10,905
(173)
10,732
Group
2019
£’000
9,222
431
-
27
9,680
97
639
736
10,416
(615)
(615)
121
(615)
9,801
-
28,247
65
638
(19,012)
9,938
(137)
9,801
The financial statements were approved and authorised for issue by the Board of Directors on 17 February 2021.
The Notes on pages 25 to 42 form part of these financial statements.
John Potter
Director
Malcolm Groat
Director
____
22
Consolidated Statement of Changes in Equity
for the financial year ended 30 September 2020
Group
Equity attributable to equity holders of the parent
Note
Share capital Share premium
Balance at 1 October 2018
Loss for the year
Comprehensive income for the year
Total comprehensive loss for the
year
Issue of shares (net of costs)
Expiry of warrants
Share-based payment charge
At 30 September 2019
Loss for the year
Comprehensive income for the year
Total comprehensive loss for the
year
15, 16
17
19
Issue of shares (net of costs)
15, 16
Exercise of warrants
Expiry of warrants
Share-based payment charge
At 30 September 2020
17
17
19
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
£’000
26,542
-
-
-
1,638
67
-
28,247
-
-
-
866
109
-
-
29,222
Warrant
reserve
£’000
Translation
reserve
£’000
43
-
-
-
59
(37)
-
65
-
-
-
1,377
(114)
(43)
3
1,288
223
-
415
415
-
-
-
638
-
(356)
(356)
-
-
-
-
282
Retained Deficit
£’000
(18,393)
(749)
2
(747)
-
35
93
(19,012)
(1,028)
-
(1,028)
-
114
43
(4)
Total
£’000
8,415
(749)
417
(332)
1,697
65
93
9,938
(1,028)
(356)
(1,384)
2,243
109
-
(1)
Non-controlling
interest
£’000
(97)
(33)
(7)
(40)
-
-
-
(137)
(42)
6
Total
Equity
£’000
8,318
(782)
410
(372)
1,697
65
93
9,801
(1,070)
(350)
(36)
(1,420)
-
-
-
-
2,243
109
-
(1)
(19,887)
10,905
(173)
10,732
The following describes the nature and purpose of each reserve within owners' equity:
Descriptions and purpose
Reserve
Amount subscribed for share capital at nominal value, together with transfers to share premium upon redenomination of the shares to nil par value.
Share capital
Share premium
Amount subscribed for share capital in excess of nominal value, together with transfers from share capital upon redenomination of the shares to nil
par value.
Warrant reserve
Amounts credited to equity in respect of warrants to acquire ordinary shares in the Group.
Translation reserve Gains and losses on the translation of foreign operations.
Retained deficit
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income less transfers to retained deficit on expiry.
Non-controlling interest
Non-controlling interest share of losses of TurboShale Inc., together with adjustments associated with the initial recognition of, and changes in, the
non-controlling interest. Refer to Note 18.
The Notes on pages 25 to 42 form part of these financial statements.
____
23
Consolidated Statement of Cash Flows
for the financial year ended 30 September 2020
Cash flows from operating activities
Loss after tax
Adjustments for:
Finance costs
Amortisation
Share based payment charge
Unrealised foreign exchange losses
Costs settled by the issue of shares
Share of loss of joint venture
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Cash used in operations
Interest received/(paid)
Net cash outflow from operating activities
Cash flows from investing activities
Investment in intangibles
Sale of investments
Investment in joint venture
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Issue of equity instruments
Costs of share issue
(Repayment)/receipt of loan finance
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Foreign currency translation differences
Cash and cash equivalents at end of financial year
The Notes on pages 25 to 42 form part of these financial statements.
Note
2
3
8
9
15, 16
Group
2020
£’000
Group
2019
£’000
(1,070)
(782)
(1)
6
(1)
81
-
40
(21)
(384)
(1,350)
1
(1,349)
(29)
-
(1,279)
-
(1,308)
2,535
(182)
-
2,353
(304)
639
(1)
334
4
6
93
-
5
-
(55)
232
(497)
(4)
(501)
(642)
104
(95)
(633)
1,767
(109)
(150)
1,508
374
262
3
639
____
24
Notes to the financial statements
for the financial year ended 30 September 2020
1. Accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented,
unless otherwise stated.
1.1 Basis of preparation and going concern
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations and with those parts of the Isle of Man Companies Act 2006 applicable to companies
reporting under IFRS. The financial statements have been prepared under the historic cost convention.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions. Although these estimates are based on management’s best
knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Details of the Group’s significant accounting judgments are set out in these
financial statements and include:
Judgements
-
Impairment indicator assessment on intangible assets and property, plant and equipment used in exploration and evaluation activities
The Directors consider that tangible and intangible assets employed in exploration and evaluation activities form part of a single cash generating unit for the purposes of impairment
assessment. In determining whether indicators of impairment on such assets existed judgment was required. The directors have considered the remaining licence term and standing,
future plans for exploration, the measured resources within the mineral leases owned by the Company; and the likelihood of commercially viable extraction technology being
developed and sufficient funding being available to the Company to develop and exploit such technology. The Board concluded that no impairment indicator existed as at 30
September 2020. Refer to Note 8.
-
Internally generated development assets
Greenfield has incurred expenditure on researching and developing the design and operation of a pilot plant and processes that is not of a scale economically feasible for commercial
production. Judgement is required In determining what constitutes research expenditure, to be expensed in profit and loss, and what constitutes development expenditure that meets
the criteria set out in IAS 38, which must be capitalised. Qualifying expenditure is capitalised from the point at which Greenfield’s board are satisfied as to the technical feasibility of
the production processes. The board have deemed that this was achieved when the preliminary results of the Pre-Feed study were released, which indicated the use of the Oil
Sands Technology was likely to be economically viable. Judgements on these matters affect the Group’s share of Greenfield’s net assets and profits that are recognised under the
equity method.
- Joint arrangements
In assessing whether the Group is party to a joint arrangement under IFRS 11, the Group considers whether decisions about relevant activities of the investee entity require the
unanimous consent of the investors (“joint control”). Having established the existence of joint control, judgement is required to establish whether the structure of the arrangement,
the contractual terms or other facts and circumstances give the parties to the arrangement rights to the assets and obligations for the liabilities of the investee entity. In those
circumstances, the entity is a joint operation. Having evaluated the matter, the Group has determined that the parties to the arrangement.do not have rights to the assets and
obligations of the investee entity and therefore the joint arrangement is a joint venture.
Judgement is also required concerning the value at which non-cash assets contributed by the joint venture partners are recognised. The Group has contributed cash assets of
US$1.625 million. In the judgement of the Directors, the value of intellectual property and undertakings to deliver future services provided by Valkor matched the value of the cash
contributions made by the Group
Estimates
____
25
Notes to the financial statements
for the financial year ended 30 September 2020
- Share based payments
Estimates were required in determining the fair value of share options and warrants granted in the year including future share price volatility and the instrument life. Volatility is
estimated using TomCo’s historic share prices for a period of time that matches the exercise period of the warrant or option. This assumes that historic share price volatility is the
best estimate of future volatility. The Black-Scholes model is used for valuing both options and warrants. Estimates are also made of the likely time of exercise of the options or
warrants.
The Group has consistently applied all applicable accounting standards.
Going concern
At 9th February 2021, the Group had cash of approximately £2.45 million.
The Directors have prepared cash flow forecasts for the period to 30 June 2022. Under the forecasts, the Group plans to engage a third-party engineering evaluation of
a commercial scale plant design based on the Petroteq oil recovery system and potentially secure a site on which to build a commercial scale plant. The forecasts indicate
that the Group has sufficient funds to complete these tasks and to ensure its ability to continue in operational existence for the foreseeable future and at least until 30
June 2022. On this basis, the Directors consider it appropriate to prepare the financial statements on the going concern basis.
Further funding may be required if the Directors decide to explore the opportunity to develop a commercial scale oil sands plant or to further advance the RF technology.
The Directors note that COVID-19 has had a significant negative impact on the global economy and oil prices have been volatile, which may mean it is harder to secure
additional funding than it has historically been. Notwithstanding this, the Directors have a reasonable expectation that they can secure additional funding, based on recent
successful fundraisings, should it be required.
1.2 Future changes in accounting standards
The IFRS financial information has been drawn up on the basis of accounting standards, interpretations and amendments effective at the beginning of the accounting period.
IFRS 16 “Leases” was effective for the first time in the year ended 30 September 2020. The Group currently has no leases other than short term or low value leases and therefore
this standard currently has no impact on the Group.
There are currently no new or revised standards, amendments and interpretations to existing standards that are not effective for the financial year ended 30 September 2020 and
have not been adopted early, which, when effective, might have an impact upon the Group’s financial statements.
1.3 Basis of consolidation
The Group accounts consolidate the accounts of the parent company, TomCo Energy plc, and all of its subsidiary undertakings drawn up to 30 September 2020. All intra-group
transactions, balances, income and expenses are eliminated on consolidation.
The acquisition of subsidiaries is accounted for on the purchase basis. A subsidiary is consolidated where the Company has control over an investee. The Group controls an
investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. On acquisition
all of the subsidiary’s assets and liabilities which existed at the date of acquisition are recorded at their fair values reflecting their condition at the time. If, after re-assessment, the
Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately
____
26
Notes to the financial statements
for the financial year ended 30 September 2020
in the statement of comprehensive income.
Entities over which the Group has joint control are classified as joint ventures and are accounted for using the equity method of accounting. On initial recognition the investment
in the joint venture is recognised at cost. The carrying amount is increased or decreased to recognise the Group’s share of the profit or loss of the joint venture after the date of
acquisition.
1.4 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been
identified as the Board of Directors.
Based on an analysis of risks and returns, the Directors consider that the Group has two principal business segments based on geographical location. The loss before taxation
arises principally within the UK and US. Net assets are principally in the UK and the US.
1.5 Revenue
Revenue represents the Group’s share of sales of oil during the year, excluding sales tax and royalties. Income arises from the US and is recognised when the oil is delivered to
the customer. No revenue has arisen in the current or prior year.
1.6 Finance income
Finance income is accounted for on an effective interest basis.
1.7 Property, plant and equipment
Property, plant and equipment employed in exploration and evaluation activities are carried at cost. No depreciation has been provided on these assets as they had not been
brought into use by the end of the financial year. Subsequent depreciation will be capitalised to exploration and development costs.
1.8
Intangible assets
Exploration and development licences
The Group applies the full cost method of accounting for oil and gas operations. For evaluation properties, all mineral leases, permits, acquisition costs, geological and geophysical
costs and other direct costs of exploration appraisal, renewals and development are capitalised as intangible fixed assets in appropriate cost pools, with the exception of tangible
assets, which are classed as property, plant and equipment. Costs relating to unevaluated properties are held outside the relevant cost pool and are not amortised until such time
as the related property has been fully appraised. When a cost pool reaches an evaluated and bankable feasibility stage, the assets are transferred from intangible to oil properties
within property, plant and equipment.
Technology licences
Amortisation is not charged on technology licences associated with oil and gas assets until they are available for use.
Patents and patent applications
Patents and patent applications acquired in consideration for a combination of cash and the issue of shares in subsidiary undertakings are recognised at fair value, and amortised
over their expected useful lives, which is 12 years being the patent term.
____
27
Notes to the financial statements
for the financial year ended 30 September 2020
1.9
Impairment
Exploration and development licences
Exploration and development assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed the recoverable amount. In
accordance with IFRS 6 the Group firstly considers the following facts and circumstances in their assessment of whether the Group’s exploration and evaluation assets may be
impaired, whether:
the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future, and is not expected to be renewed;
substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither budgeted nor planned;
exploration for and evaluation of hydrocarbons in a specific area have not led to the discovery of commercially viable quantities of hydrocarbons and the Group has decided
to discontinue such activities in the specific area; and
sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely
to be recovered in full from successful development or by sale.
If any such facts or circumstances are noted, the Group performs an impairment test in accordance with the provisions of IAS 36. The aggregate carrying value is compared against
the expected recoverable amount of the cash generating unit, which is generally the field, except that a number of field interests may be grouped as a single cash generating unit
where the cash flows are interdependent. The recoverable amount is the higher of value in use and the fair value less costs to sell.
Any impairment loss would be recognised in the income statement and separately disclosed.
Technology licence
The carrying amount of the Group’s other intangible asset, its patents and technology licence, is reviewed at each reporting date to determine whether there is any indication of
impairment. If such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its
recoverable amount. Impairment losses are recognised in the income statement.
Joint ventures
The Directors determine whether there is any objective evidence that the net investment in Greenfield is impaired. Objective evidence includes observable data about the following
potential loss events:
•
•
•
•
•
significant financial difficulty of Greenfield;
breach of contract, default or delinquency by Greenfield;
grant by the Group to Greenfield of concessions it would not otherwise consider by reason of Greenfield’s financial difficulty;
the bankruptcy or financial reorganisation of Greenfield becoming probable; and
significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which Greenfield operates.
If such evidence exists, the Directors assess the Group’s net investment in Greenfield for impairment. The Directors are satisfied that there was no such evidence at 30 September
2020 (or subsequently).
1.10 Taxation
Taxation expense represents the sum of current tax and deferred tax.
____
28
Notes to the financial statements
for the financial year ended 30 September 2020
Current tax is based on taxable profits for the financial period using tax rates that have been enacted or substantively enacted by the reporting date. Taxable profit differs from net
profit as reported in the statement of comprehensive income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes. If deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit nor loss, it is not accounted for. Deferred tax is determined using tax rates that have been enacted or substantively enacted at the reporting
date and that are expected to apply when the related deferred income tax asset is realised, or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversals of the temporary differences is controlled by the
Group and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax
is also dealt with in equity.
1.11 Foreign currencies
The accounts have been prepared in pounds sterling being the presentational currency of the Group. The functional currency of the holding company is also pounds sterling. The
functional currency of the US subsidiaries is US dollars. Assets and liabilities held in the Group or overseas subsidiaries in currencies other than the functional currency are
translated into the functional currency at the rate of exchange ruling at the reporting date.
Transactions entered into by Group entities in a currency other than the functional currency of the entity are recorded at the rates ruling when the transactions occur. Exchange
differences arising from the settlement of monetary items are included in the statement of comprehensive income for that period.
The assets and liabilities of subsidiaries and joint ventures with functional currencies other than sterling are translated at balance sheet date rates of exchange. Income and
expense items are translated at the average rates of exchange for the period. Exchange differences arising are recognised in other comprehensive income (attributed to the parent
equity holder and non-controlling interests as appropriate).
1.12 Leases
The Group is party as lessee only to low value or short term leases. Rentals payable under such leases, net of lease incentives, are charged to the statement of comprehensive
income on a straight-line basis over the period of the lease.
1.13 Non-derivative equity instruments
The Group classifies its non-derivative equity instruments as at fair value through other comprehensive income. Gains or losses on disposals of these items are recognised in other
comprehensive income.
1.14 Debt instruments at amortised cost
These assets are non-derivative financial assets which are held in a business model whose objective is to collect contractual cashflows and whose contractual terms give rise on
____
29
Notes to the financial statements
for the financial year ended 30 September 2020
specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. They arise principally through types of contractual monetary asset such
as receivables. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised
cost using the effective interest rate method, less provision for impairment. Impairment provisions are recognised based on expected credit losses over the asset’s life.
The Group’s assets held at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.
1.15 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at the bank and other short-term liquid investments with original maturities of three months or less.
1.16 Trade payables
Trade payables are recognised at amortised cost. All of the trade payables are non-interest bearing.
1.17 Share capital
Ordinary shares are classified as equity. Shares issued in the period are recognised at the fair value of the consideration received.
1.18 Warrants
Warrants issued as part of financing transactions in which the holder receives a fixed number of shares on exercise of the warrant are fair valued at the date of grant and recorded
within the warrant reserve. Fair value is measured by the use of the Black-Scholes model.
On expiry or exercise, the fair value of warrants is credited to reserves as a change in equity.
1.19 Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling shareholders that are present ownership
interests entitling their holders to a proportionate share of net assets upon liquidation may initially be measured at fair value or at the non-controlling interests’ proportionate share
of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially
measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling
interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a
deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interests and
the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Group.
Details concerning non-wholly owned subsidiaries of the Group that have material non-controlling interests are set out in note 18.
1.20 Joint ventures
Joint arrangements within the scope of IFRS 11 are assessed as to whether they represent joint operations or joint ventures. Where the structure of the arrangement, the contractual
terms or other facts and circumstances give the parties to the arrangement rights to the assets and obligations for the liabilities of the investee entity, the entity is a joint operation. . Joint
____
30
Notes to the financial statements
for the financial year ended 30 September 2020
ventures are recognised using the equity method of accounting. The initial cost of investment is adjusted to reflect the Group’s share of the joint venture’s profits and losses and other
comprehensive income.
Investments in joint ventures are assessed for impairment where there is objective evidence that the carrying value of the investment may not be recoverable. Impairment is measured at
the difference between the carrying amount of the investment and the higher of its FV less cost of disposal and its value in use.
1.21 Share-based payments
Equity-settled share-based payments to directors are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of
equity-settled share-based transactions is set out in Note 19.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period or periods, based on the Group’s estimate of equity instruments that will
eventually vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates,
if any, is recognised in profit or loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to equity reserves.
____
31
Notes to the financial statements
for the financial year ended 30 September 2020
2. Segmental reporting – Analysis by geographical segment
The loss before taxation arises within principally the UK and US. Net assets are principally in the UK and US. Based on an analysis of risks and returns, the Directors consider that the
Group has two principal business segments based on geography, with the UK primarily representing head office costs of the Group. Operating segments are reported in a manner
consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the Board of Directors. The Directors
therefore consider that no further segmentation is appropriate.
Year ended 30 September
External revenue
Inter-segment sales
Cost of sales
Gross profit/(loss)
Impairment
Administrative expenses
Operating loss
Financial income
Finance costs
Share of loss of joint venture
Loss before taxation
Non-Current assets:
– Exploration and development assets
– Other
– Property, plant and equipment
– Patents
- Investments in joint venture
Current assets:
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities:
Trade and other payables
Total liabilities
2020
£’000
-
United States United Kingdom
2020
£’000
-
94
-
94
-
(884)
(790)
1
-
-
-
-
(241)
(241)
-
-
(40)
(281)
8,819
26
411
15
1,224
10,495
-
4
10,499
(309)
(309)
-
(789)
-
-
-
-
-
-
398
330
728
(186)
(186)
Eliminations
2020
£’000
(94)
-
(94)
94
-
-
-
-
-
-
(280)
(280)
280
280
Eliminations
2019
£’000
(94)
(94)
94
-
-
-
-
-
Total
2020
£’000
-
-
-
-
-
(1,031)
(1,031)
1
-
(40)
(1,070)
8,819
26
411
15
1,224
10,495
118
334
10,947
(215)
(215)
United States
2019
£’000
-
-
-
-
(177)
(177)
-
-
-
(177)
9,200
27
431
22
-
9,680
-
21
9,701
(389)
(389)
United Kingdom
2019
£’000
-
94
-
94
-
(695)
(601)
1
(5)
-
(605)
-
-
-
-
-
-
97
618
715
(226)
(226)
Total
2019
£’000
-
-
-
-
-
(778)
(778)
1
(5)
-
(782)
9,200
27
431
22
-
9,680
97
639
10,416
(615)
(615)
____
32
Notes to the financial statements
for the financial year ended 30 September 2020
3. Finance costs
Interest income
Loan note interest (Note 21)
Total finance income/(costs) for the financial year
4. Operating loss
The following items have been charged in arriving at operating loss:
Auditors’ remuneration: audit services
Rentals payable in respect of land and buildings
5. Taxation
There is no tax charge in the year due to the loss for the year.
Factors affecting the tax charge:
Loss on ordinary activities before tax
Loss on ordinary activities at standard rate of corporation tax
in the UK of 19% (2019: 19%)
Effects of:
Group share of joint venture losses
Losses carried forward
Tax charge for the financial year
6. Employees and Directors
2020
£’000
(1)
-
(1)
2020
£’000
33
52
2020
£’000
(1,070)
(203)
7
196
-
2019
£’000
(1)
5
4
2019
£’000
31
37
2019
£’000
(782)
(149)
-
149
-
The Group has no employees other than the Directors, whose emoluments comprise fees paid for services. The amounts
for their services are detailed below:
Salaries
2020
£’000
Share-based
payment
expense/(credit)
2020
£’000
Share-based
payment
expense
2019
£’000
Salaries
2019
£’000
S West (appointed 17 February 2020; resigned 30
September 2020)
J Potter
A Benger (resigned 30 September 2020)
M Groat
A Jones (resigned 16 March 2020)
L Read (resigned 28 June 2019)
Total remuneration
27
91
20
20
250
-
408
4
20
5
5
(35)
-
(1)
-
74
18
18
98
12
220
31
7
7
48
-
93
Remuneration for A Jones included compensation for loss of office of £150,000. Unvested share options granted to Mr Jones
were outstanding on his resignation, and this has resulted in a credit to profit and loss in respect of charges for share-based
payment previously recognised in respect of those options that have been forfeited.
____
33
Notes to the financial statements
for the financial year ended 30 September 2020
7. Loss per share
Basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year. Reconciliations of the losses and weighted average number of shares
used in the calculations are set out below.
Financial year ended 30 September 2020
Basic and Diluted EPS
Losses
£’000
Weighted
average
number of
shares
Per share
Amount
Pence
Losses attributable to ordinary shareholders on continuing operations
(1,028)
339,346,801
Total losses attributable to ordinary shareholders
(1,028)
339,346,801
Financial year ended 30 September 2019
Basic and Diluted EPS
Losses attributable to ordinary shareholders on continuing operations
(749)
102,524,614
Total losses attributable to ordinary shareholders
(749)
102,524,614
(0.30)
(0.30)
(0.73)
(0.73)
The warrants and share options which were issued or for which entitlement to warrants was established in the current and
prior years (Notes 17 and 18) are anti-dilutive. As these instruments would be anti-dilutive a separate diluted loss per share
is not presented.
8.
Intangible assets
Oil & Gas
Exploration and
development
licences
£’000
8,047
643
510
9,200
29
(410)
8,819
-
-
-
-
-
8,819
9,200
8,047
Cost
At 1 October 2018
Additions
Translation differences
At 30 September 2019
Additions
Translation differences
At 30 September 2020
Amortisation/Impairment
At 1 October 2018
Amortisation
At 30 September 2019
Amortisation
At 30 September 2020
Net book value
At 30 September 2020
At 30 September 2019
At 30 September 2018
Oil & Gas
Oil & Gas
Oil & Gas
Technology licence
Patents and
patent
applications
£’000
£’000
1,314
1,314
-
1,314
1,314
-
1,314
-
1,314
-
-
-
34
(1)
1
34
-
(1)
33
6
6
12
6
18
15
22
28
Total
£’000
9,395
642
511
10,548
29
(411)
10,166
1,320
6
1,326
6
1,332
8,834
9,222
8,075
The exploration and development licences comprise nine Utah oil shale leases covering approximately 15,488 acres. In
respect of leases ML 49570 and ML 49571, independent natural resources consultants SRK Consulting (Australasia) Pty
Ltd, part of the internationally recognised SRK Group, reported in March 2019 best estimate Contingent Resources (2C) of,
in aggregate, 131.3 million barrels (“MM bbl”) of oil assessed under Petroleum Resources Management System (“PRMS”)
guidelines, plus a best estimate Prospective Resource (2U) of, in aggregate, 442.8 MMbbl of oil across the two leases. This
____
34
Notes to the financial statements
for the financial year ended 30 September 2020
included the Holliday A Block, where two field tests have been undertaken to date, with 2C Contingent Resources of 57.3
MMbbl of oil and 2U Prospective Resources of 84.7 MMbbl of oil. The Directors continue to consider the Holliday A Block to
be prospective and are seeking methods of extracting the shale oil through development of TurboShale’s RF technologies.
The claim areas and the Group’s interest in them are as follows:
Asset
ML 49570
ML 49571
ML 48801
ML 48802
ML 48803
ML 48806
ML 49236
ML 49237
ML 50151
Per cent
Interest
100
100
100
100
100
100
100
100
100
Licence
Status
Prospect
Prospect
Prospect
Prospect
Prospect
Prospect
Prospect
Prospect
Prospect
Expiry Date
31/12/2024
31/12/2024
01/10/2021
01/10/2021
01/10/2021
01/12/2023
01/12/2023
01/12/2023
30/11/2025
Licence Area
(Acres)
1,638.84
1,280.00
1,918.50
1,920.00
1,920.00
1,880.00
2,624.21
1,666.67
640.00
In performing an assessment of the carrying value of the exploration licences at the reporting date, the Directors concluded
that it was not appropriate to book an impairment given the measured resource, the licence term and the continued plans to
explore and develop the block, including the new technologies which TurboShale is seeking to develop.
The outcome of ongoing exploration, and therefore whether the carrying value of the exploration licences will ultimately be
recovered, is inherently uncertain and is dependent upon successful development of commercially viable extraction
technology. If the required additional funding was not to be made available to the Group or commercially viable extraction
technologies cannot be developed, the carrying value of the asset might need to be impaired.
The Group continues to renew the leases set out above as and when they expire and has no reason to believe that the
leases will not continue to be capable of renewal in the future.
Further field tests of the TurboShale technology were postponed because of the Covid-19 pandemic. The Board intends to
review the position inQ2 2021 but has the intention to resume the testing programme when conditions permit.
9. Property, plant and equipment
Cost at 30 September 2018
Additions
Translation differences
At 30 September 2019
Additions
Translation differences
At 30 September 2020
At 30 September 2019
At 30 September 2018
10.
Investment in joint venture
Carrying value under equity method
At 1 October 2019
Cost
Share of loss of joint venture
Other comprehensive income-translation differences
At 30 September 2020
At 30 September 2019
At 30 September 2018
Exploration and evaluation equipment
Total
£’000
313
95
23
431
-
(20)
411
431
313
£’000
-
1,279
(40)
(15)
1,224
-
-
____
35
Notes to the financial statements
for the financial year ended 30 September 2020
During the year ended 30 September 2020, the Group formed a joint venture, Greenfield Energy LLC (“Greenfield”), with
Valkor LLC (“Valkor”). Greenfield is incorporated in Utah, USA. Its initial purpose is the development of a plant utilising
technology licensed or assigned to it by third parties for Valkor to recover oil from oil sands in Utah, which is considered
strategic to the Group’s activities. Both the Group and Valkor have 50% ownership interests in Greenfield.
There is no quoted market price for the Group’s investment in Greenfield.
Summarised financial information for Greenfield at and for the period ended 30 September 2020 is as follows:
Revenue
Loss from continuing operations
Other comprehensive income
Total comprehensive loss
Group share of total comprehensive loss (50%)
Non-current assets
Current assets
Total assets
Trade and other payables
Net assets
Group share of net assets (50%)
Greenfield has a different reporting date to that of the Group.
.
11. Trade and other receivables
Current
Other receivables
Prepayments and accrued income
Non-current
Other receivables
Total Receivables
2020
£’000
-
(80)
(30)
(110)
(55)
2,091
507
2,598
(150)
2,448
1,224
Group
2020
£’000
64
54
118
26
144
Group
2019
£’000
50
47
97
27
124
As at 30 September 2020, there were no receivables considered past due (2019: £Nil). The maximum exposure to credit
risk at the reporting date is the fair value of each class of receivable and cash and cash equivalents as disclosed in Note 19.
All current receivable amounts are due within six months.
12. Cash and cash equivalents
Cash at bank and in hand
Group
2020
£’000
334
Group
2019
£’000
639
The Group earns 0.05% (2019: 0.05%) interest on its cash deposits, consequently the Group’s exposure to interest rate
____
36
Notes to the financial statements
for the financial year ended 30 September 2020
volatility is not considered material.
13. Trade and other payables
Current
Trade payables
Other payables
Accruals
Group
2020
£’000
28
30
157
215
Group
2019
£’000
408
17
190
615
All current amounts are payable within six months and the Directors consider that the carrying values adequately represent
the fair value of all payables.
14. Deferred tax
Unrecognised losses
The Group has tax losses in respect of excess management expenses of approximately £10.8 million (2019: £9.8
million) available for offset against future Company income. Trading losses of £1.9 million (2019: £1.3 million) are also
available. This gives rise to a potential deferred tax asset at the reporting date of £2.4 million (2019: £1.9 million). No
deferred tax asset has been recognised in respect of the tax losses carried forward as the recoverability of this benefit
is dependent on the future profitability of the Company, the timing of which cannot reasonably be foreseen but the
excess management expenses have no expiry date. Subsidiary entities have accumulated losses of approximately
£900,000 for which no deferred tax asset is recorded given the uncertainty of future profits.
15. Share capital
Issued and fully paid at 1 October 2018 - shares of no par value
October 2018 - subscription of new ordinary shares (note16)
December 2018 - placing of new ordinary shares (note 16)
January 2019 - issue of shares in part settlement of loan (note 16)
March 2019 - placing of new ordinary shares (note 16)
May 2019 - exercise of warrants (notes 16 and 17)
July 2019 - exercise of warrants (notes 16 and 17)
August 2019 - placing of new ordinary shares (note 16)
August 2019 - issue of shares in settlement of professional fees (note 16)
At 30 September 2019
Issued and fully paid at 1 October 2019 - shares of no par value
December 2019 - placing of new ordinary shares (note16)
July 2020 - placing of new ordinary shares (note 16)
July 2020 - exercise of warrants (notes 16 and 17)
At 30 September 2020
16. Share premium
Number of shares
in issue
2019
£
62,117,799
1,176,471
27,500,000
5,000,000
21,818,182
1,530,000
1,309,091
12,857,143
142,857
133,451,543
-
-
-
-
-
-
-
-
-
-
Number of shares
in issue
2020
£
133,451,543
142,307,692
375,000,000
22,875,000
673,634,235
2020
£’000
-
-
-
-
-
2019
£’000
____
37
Notes to the financial statements
for the financial year ended 30 September 2020
At 1 October
December 2019 - placing of new shares at 0.65 pence per share, net of costs
July 2020 - placing of new shares at 0.4 pence, net of costs
July 2020 - exercise of warrants (note 17)
October 2018 - subscription of new shares at 8.5 pence per share
December 2018 - placing of new ordinary shares at 2 pence per share net of
costs
January 2019 - issue of shares in part settlement of loan at 2 pence per share
March 2019 - placing of new ordinary shares at 2.75 pence per share net of
costs
May 2019 - exercise of warrants (note 17)
July 2019 - exercise of warrants (note 17)
August 2019 - placing of new ordinary shares at 3.5 pence net of costs
August 2019 - issue of shares in settlement of professional fees at 3.5 pence
Issue of warrants to placees (note 17)
Issue of warrants as part of placing fees (note 17)
At 30 September
28,247
864
1,379
110
-
-
-
-
-
-
-
-
(1,223)
(155)
29,222
26,542
-
-
-
100
514
100
559
31
36
419
5
-
(59)
28,247
17. Warrants
At 30 September 2020, the following share warrants were outstanding in respect of ordinary shares:
Outstanding at 1 October
Expired during the year
Granted during the year
Exercised during the year
Outstanding at 30 September
Exercisable at 30 September
2020
2020
2019
2019
number
967,429
(196,000)
291,895,086
(22,875,000)
269,791,515
269,791,515
Weighted average
exercise price
Pence
4.4
(8.2)
1.0
0.5
1.0
1.0
Weighted
average
exercise price
Pence
14.0
(21.2)
2.6
(2.3)
4.4
4.4
number
356,000
(160,000)
3,610,520
(2,839,091)
967,429
967,429
The inputs into the Black-Scholes model for calculating the estimated fair value of warrants granted, at their grant date,
were as follows:
Share price (pence)
Exercise price (pence)
Expected volatility
Risk-free rate
Expected period before exercise (years)
2020
0.64-0.65
0.4-1.5
171%
1%
2
2019
2.32-3.75
2-3.5
98.8%
0.82%
2
Expected volatility was determined by calculating the historical volatility of the Company’s share price. The expected
life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Issue of Warrants
On completion of a placing on 2 October 2014, the Company issued 12,000,000 warrants with an exercise price of
0.5p and a contractual life of 5 years. The exercise price of the warrants adjusted to 6.25p and the number of warrants
adjusted to 96,000 post a share consolidation in 2017. These warrants expired during the year.
In April 2018, the Company issued 100,000 warrants with a life of two years and an exercise price of 10p as part
____
38
Notes to the financial statements
for the financial year ended 30 September 2020
consideration for the settlement of its contract with Venture Development Partners Limited concerning a framework
agreement relating to TurboShale concluded in 2017. The fair value of these warrants was assessed to be immaterial
at approximately £1,000. These warrants expired during the year.
3,610,520 warrants were issued during 2019 in connection with the placing of new shares. The fair value of these
warrants was assessed at £59,000. Of the warrants issued during 2019, warrants over 2,839,091 ordinary shares were
exercised in 2019 and 771,429 warrants remain outstanding.
291,895,086 warrants were issued during the year ended 30 September 2020 at exercise prices ranging from 0.4p per
share to 5.25p per share.22,875,000 of those warrants were exercised during the year at exercise prices ranging from
0.4p per share to 0.8p per share.
Each warrant in issue is governed by the provisions of warrant instruments representing the warrants which have been
adopted by the Company. The rights conferred by the warrants are transferable in whole or in part subject to and in
accordance with the transfer provisions set out in the Articles. The warrants outstanding at 30 September 2020 had a
weighted average exercise price of 1p (2019: 4.4p) and a weighted average remaining contractual life of 1.59 years
(2019: 1.55 years).
18. Non-controlling interests
Details of non-controlling interests are as follows:
Name of subsidiary
Proportion of
ownership interests
and voting rights
held by non-
controlling interests
2019
2020
%
%
Total
comprehensive loss
allocated to non-
controlling interest
2019
2020
£’000
£’000
Accumulated
non-
controlling
interest
2020
£’000
2019
£’000
TurboShale Inc.
20
20
(36)
(40)
(173)
(137)
Summarised financial information for TurboShale Inc is as follows:
Revenue
Loss from continuing operations
Other comprehensive income
Total comprehensive loss
Group share of total comprehensive loss (80%)
Non-current assets
Current assets-bank balances and cash
Total assets
Trade and other payables
Net liabilities
2020
£’000
-
(209)
31
(178)
(142)
1,266
4
1,270
(2,130)
(860)
2019
£’000
-
(168)
(35)
(203)
(163)
1,301
17
1,318
(2,002)
(684)
19. Share-based payments
The Company implemented a share option scheme for its Directors during the year ended 30 September 2018. A
further issue of options took place in June 2020.Options are exercisable at a price equal to the quoted market price of
the Company’s shares at the date of grant. The vesting period is between four months and 2.3 years. If the options
remain unexercised after a period of ten years from the date of grant (5 years in the case of options granted in June
2020) the options expire. Options are forfeited if the director leaves the Company before the options vest.
Details of the share options issued during the year and outstanding at the year-end are as follows:
____
39
Notes to the financial statements
for the financial year ended 30 September 2020
Outstanding at 1 October
Granted during the year
Lapsed during the year
Outstanding at 30 September
Exercisable at 30 September
2020
2020
2019
2019
Weighted average
exercise price
Pence
5.25
0.60
5.25
1.50
number
5,142,855
-
5,142,855
1,714,286
Weighted average
exercise price
Pence
5.25
-
5.25
5.25
number
5,142,855
14,000,000
(1,777,777)
17,365,078
2,539,682
Details of the options held by each Director are given in the Directors’ Report on page 5.
The inputs into the Black-Scholes model for calculating the estimated fair value of options granted, at their grant date,
were as follows:
Share price (pence)
Exercise price (pence)
Expected volatility
Risk-free rate
Expected period before exercise (years)
2020
0.6
0.6
150%
1%
1.5
2019
5.25
5.25
98.8%
0.82%
3
Expected volatility was determined by calculating the historical volatility of the Company’s share price. The expected
life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
The fair value of each option granted during the year was estimated at 0.35 pence (2019: 3.2 pence) at the date of
grant. The weighted average unexpired life of the options at 30 September 2020 was 5.97 years (2019: 8.83 years).
The credit (2019: charge) recognised in profit or loss for 2020 was £1,000 (2019: £93,000). This included a credit for
lapsed options of £39,000.
20. Financial instruments
The Group’s financial instruments, other than its investments, comprise cash and items arising directly from its
operations such as other receivables, and trade payables.
Management review the Group’s exposure to currency risk, interest rate risk, liquidity risk and credit risk on a regular
basis and consider that through this review they manage the exposure of the Group. No formal policies have been put
in place in order to hedge the Group’s activities to the exposure to currency risk or interest risk, however, this is
constantly under review.
There is no material difference between the book value and fair value of the Group and Company’s cash and other
financial assets.
Currency risk
The Group has overseas subsidiaries which operate in the United States and include expenses, assets and liabilities
denominated in US$. Foreign exchange risk is inherent in the Group’s activities and is accepted as such. The effect of
a 10% strengthening or weakening of the US dollar against sterling at the reporting date on the dollar denominated
balances would, all other variables held constant, result in a gain or loss of approximately £1,000 (2019: £10,000).
Interest rate risk
The Group and Company manage the interest rate risk associated with the Group’s cash assets by ensuring that
interest rates are as favourable as possible, whether this is through investment in floating or fixed interest rate deposits,
whilst managing the access the Group requires to the funds for working capital purposes.
The Group’s cash and cash equivalents are subject to interest rate exposure due to changes in interest rates. Short-
term receivables and payables are not exposed to interest rate risk. The Group has no borrowings as at 30 September
2020.
A 1% increase or decrease in the floating rate attributable to the cash balances held at the year-end would not result
in a significant difference on interest receivable.
____
40
Notes to the financial statements
for the financial year ended 30 September 2020
Liquidity risk
At the year end the Group and Company had cash balances comprising the following:
Bank balances
British Pounds
US Dollars
Total
Group
2020
£’000
319
15
334
Group
2019
£’000
326
313
639
All financial liabilities of the group mature in less than 12 months: details of the analysis of such liabilities is given in
Note 13.
Liquidity risk arises from the Group management of working capital. It is the risk that the Group will encounter difficulty
in meeting its financial obligations as they fall due. Refer to Note 1.1 for details of going concern.
The Group policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become
due. To achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a
period of at least 90 days.
Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or a counter party to a financial instrument fails to meet
its contractual obligations. The Group is principally exposed to credit risk on cash and cash equivalents with banks and
financial institutions. For banks and financial institutions, only independently rated parties with an acceptable rating
are utilised. There has been no significant change in credit risk since the recognition of applicable assets and therefore
no credit losses have been recognised on financial assets.
Capital management policies
In managing its capital, the Group’s primary objective is to maintain a sufficient funding base to enable the Group to
meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve
these aims, through new share issues or debt, the Group considers not only its short-term position but also its long-
term operational and strategic objectives.
21. Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-
cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will
be, classified in the cash flow statement as cash flows from financing activities:
Group 2020
Loans
Total
Group 2019
Loans
Total
1 October
Financing cash flows
£’000
£’000
Non-cash
transactions
£’000
30 September
£’000
-
-
250
250
-
-
-
-
(150)
(150)
(100)
(100)
-
-
-
-
Repayment of loans during the year ended 30 September 2019 was partly financed by the issue of new equity with a
fair value of £100,000. Interest accrued of £nil (2019: £5,000) which was paid in the year.
22. Related party disclosures
The Directors are Key Management and information in respect of key management is given in Note 6.
Greenfield Energy LLC (“Greenfield”) is a related party as the investee entity in a joint venture. The Group made an
____
41
Notes to the financial statements
for the financial year ended 30 September 2020
equity investment of US$1.65 million during the year into Greenfield. Further details concerning Greenfield are given
in note 10 .
23. Ultimate controlling party
As at 30 September 2020 and 30 September 2019 there was no ultimate controlling party.
24. Operating lease commitments
At 30 September 2020, the Group had no operating lease commitments (2019: £39,000). .
25. Subsequent events
In November 2020, the Company raised £3.5m gross of expenses by way of a placing of 777,777,777 new ordinary
shares at 0.45p per share. 388,888,888 warrants were issued with the placing, entitling the holders to purchase a
further ordinary share at a subscription price of 0.9p per share. A further 46,666,666 warrants were issued to Novum
Securities Limited, giving them the right to acquire the same number of ordinary shares at an exercise price of 0.45p
for two years.
In order to facilitate the Company’s future plans for Greenfield, which assumes successful POSP trials and the
completion of the FEED study, the net proceeds of the Placing of approximately £3.2 million have or will be specifically
utilised as follows:
- US$0.5 million (approximately £0.4 million) has been loaned by the Company to Greenfield (the “Loan”), which
together with the US$1.5 million already provided by the Company to Greenfield to upgrade the POSP, secured
the new Petroteq Licence. Under the terms of the Petroteq Licence, the US$0.5 million will be invested by
Greenfield into the POSP in order to satisfy the full consideration for the Petroteq Licence. The Loan will be
unsecured and has an interest rate of 6% per annum payable at the same time as the principal of the Loan is
repaid. The Loan is repayable on the second anniversary of the date of advance or earlier with the consent of both
Valkor and TomCo or immediately on an insolvency event of Greenfield;
- Approximately £1.3 million will be utilised for the Group’s general working capital purposes over the period to 30
June 2022 and, if required, to provide further funding to Greenfield; and
- Approximately £1.5 million will be retained by the Company with the intention that it is used, inter alia, to facilitate
the securing of a site by Greenfield for the first proposed commercial 10,000 bopd plant using Petroteq’s Oil Sands
Technology pursuant to the Petroteq Licence. Once a suitable site has been identified, the Company intends to
provide a further loan to Greenfield, which will be on the same terms as the Loan, which will be used to assist in
securing the site.
The upgrade works to the POSP were completed in December 2020 and operation of the plant started in January 2021
with optimisation of the POSP planned to continue through February 2021 to seek to achieve the designed production
rate of 250 bopd.
____
42
ONLINE
www.tomcoenergy.com
info@tomcoenergy.com
TELEPHONE
+44 20 3823 3635
ADDRESS
TomCo
Energy plc
60 Circular
Road
Douglas
Isle of Man
IM1 1SA
____
43