Annual
Report and
Financial
Statements
2021
Focused
on growth
2021 Annual Report
and Financial Statements
are an oil and gas
United1
exploration and production
company, headquartered
in Dublin and listed on the
AIM market of the London
Stock Exchange. We have
exploration, development,
appraisal and production
interests in Egypt, Jamaica
and the UK.
Focused on growth. We have refocused our
portfolio, have organic near-term growth
opportunities and high-impact exploration.
We are looking to complement this growth
with M&A activity.
1 United Oil & Gas PLC (“United” or “the Company”) and its subsidiaries (together, “United” or “the Group”).
CONTENTS
Company Overview
Our Portfolio
STRATEGIC REPORT
Our Strategy
A Year in Review
Chair’s Statement
Market Overview
Chief Executive Officer’s Review
Investment Case
Business Model
Review of Operations
Financial Review
Principal Risks and Uncertainties
S172 Statement
Corporate Responsibility Report
GOVERNANCE REPORT
Corporate Governance Statement
Board of Director’s
Director’s Report
Remuneration Committee Report
Audit and Risk Committee Report
ESG Committee Report
FINANCIAL REPORT
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash flows
Notes to the Consolidated Financial Statements
Page
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6
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28
32
38
44
50
56
58
60
64
66
68
78
79
80
81
82
83
Company Balance Sheet
Company Statement of Changes in Equity
116
117
Notes to the Parent Company Financial Statements
118
www.uogplc.com
APPENDICES
Company Information
Glossary
126
127
1
2021 Annual Report and Financial Statements Company Overview
United at
a glance
Key Figures
2021 Group Highlights
Founding Year
Employees
LTIF1
2015
10
0
Per million man hours
Revenue
19.2
$m
Countries
Licences
3
5
Cash Opex
5.9
$/boe
Net Production
2,327
boepd
Acreage Km2
Oil & Gas Fields
Gross Profit
Profit After Tax
23,980
8
12.2
$m
4.1
$m
2
United Oil & Gas PLC
1 Lost Time Injury Frequency Rate
Our Portfolio
UK
Egypt
Jamaica
Egypt (P, D, A, E)
Jamaica (E)
UK Central North Sea (D, A)
Abu Sennan
Walton-Morant
Maria (P2519)
Our producing asset. We have scope
for growth through discovered
resources and low-risk exploration
in Egypt.
Our high-impact exploration asset with
a drill ready prospect. High quality 3D
seismic supports compelling evidence
for a working petroleum system.
Our UK assets includes the Maria
discovery. The licence is located
in a highly prospective area of the
Central North Sea, close to existing
infrastructure.
Interest: 22%
Interest: 100%
Interest: 100%
Operational Phase: Production/
Development/Appraisal/Exploration
Operator: Kuwait Energy Egypt
Operational Phase: Exploration
Operator: United Oil & Gas
Operational Phase: Development/
Appraisal
Operator: United Oil & Gas
3.0 mmboe1
2P net reserves
2.4 bn bbls
unrisked mean prospective resources
~6 mmboe
mid-case recoverable resources
D: Development, P: Production, A: Appraisal, E: Exploration
1 ERCE reserves report, April 2022. Reserves of 3.0 MMboe are Net Working Interest and do not represent the Net Entitlement share of future production
legally accruing under the terms of the development and production contract.
2021 Annual Report and Financial Statements
3
Our Strategy
Our purpose
Responsibly producing energy for our communities and stakeholders.
Our vision
Our vision is to become a mid-cap energy company within 3-5 years.
Our strategy
Create value by actively managing our existing assets whilst growing
our business through additional high-margin opportunities.
United’s growth strategy is supported by four key pillars:
1/
2/
Commitment to managing a
responsible business
• Creating a safe work environment
• Producing energy in a safe and responsible
way
• Excellent business ethics and conduct
Strength of our assets
• Active portfolio management unlocking the
value of each asset at the optimum time
• Low-cost production leveraged to high oil
prices that delivers positive cashflow at all oil
price levels
• Organic growth potential
• Egypt through developing discovered resources
• Egypt production up 119% since effective date of
acquisition, with a reserves replacement ratio of 114%
over the same period
• Low-risk exploration potential in a proven
hydrocarbon basin
• Jamaica - exploration assets with > 2.4bn barrel
potential
• UK Central North Sea has attractive investment and
commercialisation opportunities
4
United Oil & Gas PLC S
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5
3/
4/
Financial and risk management
• Capital allocation
• Cost management discipline
• Management of financial risk
• Work programmes funded by cashflow
generated from existing assets
• Ability to access finance to fund future
growth opportunities
Experienced team
• Technical, financial and commercial
capabilities - expertise in identifying new
opportunities
• Breadth of experience and strong industry
relationships
• Track record of executing deals with large
scale E&P companies
• Demonstrated ability in financing significant
corporate growth
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices
A Year in Review
Our strategy
in action
1/ Active portfolio management
Progress
Active portfolio management is the management of the asset portfolio through divestments and acquisitions. During 2021 following a
review of the Company's portfolio we began the process to divest our non-core assets. This has now completed and United has exited
activities in Italy.
Looking forward
• Jamaica - renewed farm-out campaign with confidence as we look for a strategic partner(s) to unlock the vast potential in this region.
• UK Central North Sea assets are located in a highly prospective area and have attractive investment and commercialisation
opportunities.
• M&A - We continue to look for new business opportunities of scale, that will deliver growth and shareholder return.
6
United Oil & Gas PLC 2/ Abu Sennan:
a platform for
organic growth
Progress
Production averaged 2,327 boepd net. In 2021, a total of five
wells at Abu Sennan were drilled. Two of these wells were
exploration wells and three were development wells. All wells
encountered commercial levels of hydrocarbons.
We had a 100% exploration and development success rate
from the Egypt drilling programme, replacing reserves
and accelerating production of existing reserves. We had
commercial oil discoveries at the exploration wells, ASD-1X and
ASX-1X. The exploration wells de-risked further exploration in
the licence.
Looking forward
• Abu Sennan offers tangible production growth through
development of discovered resources and low-risk exploration.
• The 2022 drilling programme consists of five wells, three
development and two exploration. The exploration wells both
have the potential to deliver large reserves and production
additions targeting combined mean recoverable resources
estimated by United at over 10 mmbbls gross.
• The Abu Sennan licence provides a platform for both organic
growth and also a base from which we can review further
growth opportunities in 2022 and beyond.
3/ Capital
discipline
and risk
management
Progress
United has a strong focus on capital discipline, risk management
and cost control ensuring that the business preserves capital
and balance sheet strength.
Our producing asset in Egypt has demonstrated its resilience in
a low-price oil environment and we are currently benefitting from
higher commodity pricing. We invest capital where we believe we
will get the best returns.
We have also divested non-core assets during 2021 to
streamline the company and focus investment in assets that
can drive growth.
Looking forward
• The existing portfolio is fully funded from operating cashflow.
• We have extended the maturity of our financing facility to
provide financial flexibility
• We have the balance sheet strength to provide a stable
platform for growth from both organic opportunities and via
new business development opportunities.
• Deploying the proceeds of divestment into growth
opportunities that generate the best returns.
7
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Chair's Statement
A balanced full
cycle portfolio
Dear Shareholders,
Introduction
I am pleased to report that in 2021 we
took further steps to refocus the company
into a cash generative, low-risk production
business in Egypt complemented by high
impact exploration opportunities.
Our production portfolio is delivering strong
operational cashflow at current prices and I
feel we are well placed to capitalise on the
new opportunities we now see emerging
across the industry and on our organic
growth options.
In addition, in 2021 we strengthened our
team in certain areas and I believe now have
the capability to handle an asset base many
times the current size without materially
increasing our cost base.
Key activities in 2021
In Egypt, we continued the drilling successes
of 2020 with a 100% success rate for the
five exploration and development wells
in the 2021 campaign. All of these wells
encountered oil and were quickly brought
into production, with the exploration
successes further de-risking the upside on
the licence. Our technical team continue to
play a very important role in working closely
with the operator and our Joint Venture (JV)
partners in maximising the returns from
these assets and realising their full potential.
While the revision in our production guidance
for the Abu Sennan licence in September
was disappointing, we are pleased that
both the decline of the production and the
increase in water-cut has been stable since
September 2021. We will continue to work
closely with the operator to monitor field
performance and ensure that production
from the field is optimised and new drilling
opportunities are appropriately de-risked.
During the year, and consistent with our
strategy, we took steps to divest our non-
core assets in the UK Central North Sea (UK
CNS) and in Italy, with a view to reinvesting
the proceeds to support growth. The UK
CNS transaction has now been terminated
and we look forward to evaluating further
commercialisation opportunities in what
is now an area of significant development
activity. The Italian asset divestment has
completed (post-period end) and we were
pleased to sign the settlement agreement on
the Crown milestone payment accelerating
the receipt of the milestone payment at a
modest discount. The substantial proceeds
raised from portfolio management will be
reinvested in the business.
8
United Oil & Gas PLC Climate change and energy transition position statement
United are acutely aware that our industry is facing increasing demands to clarify the implications of energy transitions for their
operations and business model, and to explain the contributions that they can make to reducing greenhouse gas emissions and to
achieving the goals of the Paris Agreement. The Board of United acknowledges and supports the global response to climate change
towards a lower-carbon world, and more sustainable energy future and supports the United Nations Sustainable Development Goals,
including universal access to affordable energy.
United is an oil and gas company, involved in the business of exploring, appraising, and developing and producing hydrocarbons.
United recognises that the energy transition will take time and, in line with the International Energy Agency’s (IEA) 2019 Sustainable
Development Scenario, believe that oil and gas demand will remain strong across the globe for decades to come. This requires
responsible, transparent and safe investment in existing and future fields. We see a place for United to responsibly and safely develop
oil and gas resources to aid global economic development and deliver value for all our stakeholders.
In Jamaica, following close consultations
with the Government, we were awarded
an extension of the Walton Morant licence
to January 2024. This affords us the time
to complete a comprehensive farmout
process to attract the most suitable
partners to work with ourselves and the
Government of Jamaica to unlock the full
potential of this highly prospective area.
Business development opportunities
across the full cycle continued to be
offered to and assessed by the team in
the course of 2021, and a number of such
opportunities are still under consideration.
However, only the most attractive
ones consistent with our strategy and
investment criteria will be taken forward.
Board and governance
There were no changes to the Board in the
year, and the Board and all Committees
functioned effectively under their
respective Chairs, despite not being able
to meet physically until the last meetings
of the year in December. An internal Board
and Committee evaluation was carried
out post-year end, the findings, and
conclusions from which are reported on
page 55.
I believe that we continue to have a good
balance of technical, financial, commercial
and governance experience on the Board
and that the non-executive directors give
appropriate support and challenge to the
executives both at and outside of Board
and Committee meetings.
Strategy
Our strategy remains clear: create value
by actively managing our existing assets
whilst growing our business through
additional high-margin opportunities.
Financial results for 2021
I am very pleased to report to a profit after
tax in 2021 of $4.1m With our production
and revenues continuing strongly, and
with operating costs in 2021 of $5.90 per
barrel, we entered 2022 with an asset base
resilient to low oil prices and with a strong
balance sheet.
Post year end
Since year-end we have made further
progress. We commenced production
from the Al Jahraa-13 development well
which was the last well in the 2021 drilling
campaign. Our 2022 drilling campaign
is fully funded from operating cashflow
and includes five wells. The campaign
commenced with the ASD-2 development
well which encountered at least 25.5m of net
pay and commenced production at the end
of March. We were also pleased to report the
agreement of the Crown milestone payment
which will bring in $2.5m by the end of
2022 and the completion of the Italy asset
divestment which resulted in payment to
United of c. €2.3m. The proceeds of both will
be invested to grow the Group.
Impact of COVID-19
While COVID-19 had less of an impact on our
activities in 2021 than in 2020, it continued
to have some effect on the way in which we
worked, our ability to travel freely and our
interactions with employees, shareholders,
and our other stakeholders. Despite this, I
feel the company has come through this
era well without significant disruption to our
business and I’m pleased to report that all
our staff are in good health.
Dialogue with shareholders
Shareholders' views on the company, its
strategy, remuneration policy and indeed
all aspects of our business and operations
are very important to the Board and we
welcome every opportunity to engage. We
were particularly happy to have been able
to meet a number of our shareholders in
person in London last November and we
look forward to further such meetings
as COVID-19 restrictions begin to ease.
However, we would be very happy to hear
from you in whatever manner suits you
best. I can be reached via the Company
Secretary at info@uogplc.com.
Conclusion and outlook for 2022
2021 was another very successful year
for the company in the development and
pursuit of our strategy and I would like to
record my thanks to our executives and
staff for their continued commitment and
energy throughout the year.
We look forward very positively to the
year ahead. The oil price has started
the year high, we have a balanced full
cycle portfolio, a fully funded drilling and
work programme in Egypt, engagement
with potential partners on the Jamaica
farm-out, and we have exciting new
opportunities under review.
Graham Martin
Chair
25 April 2022
9
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Market Overview
Recovery of the
global economy
2021 was a year characterised by the world
cautiously emerging following the worst of
the COVID-19 pandemic and the roll-out of the
COVID-19 vaccines.
The year began with the world facing the impact of the Beta
variant of the virus, which had an impact on day-to-day living.
As a result, the financial markets, economies and society
became more accustomed to what had become the ‘new-
normal’. Growth was cautious, but strong during the year,
with multiple high-profile IPO’s successfully completing
during the year. Financial markets began to invest again with
most of the major indexes rebounding much faster than had
been expected.
Towards the end of the year, we were once again reminded
of the impact of the pandemic, when the Omicron variant
began to increase in prevalence. Whilst eventually deemed
to be a less severe version of COVID-19, the Omicron variant
was a stark reminder of how disruptive the pandemic had
been and could potentially be once again.
Despite this, we emerged into 2022 in a much more stable
environment in which to do business, particularly in the oil
and gas markets, where we saw brent closing the year at
around $77 per barrel.
10
United Oil & Gas PLC Political and economic
Politically, the year was dominated both
by the continuing impact of the COVID-19
pandemic, how to, and when to impose
lockdown restrictions as well as the
implications of how to distribute COVID-19
vaccines to the population.
new offshore licensing rounds coming
under increased scrutiny as to whether
they are required in a country so focused
on the energy transition. More recent
developments in Ukraine have perhaps
altered this view, with energy supply
security an increasingly important factor.
Also, during 2021 we saw continued
government borrowing across the world
which provided a stimulus to struggling
businesses and supported growth. In
contrast however and as a by-product
of significant borrowing by world
governments, we saw rising inflation
across the world towards the end of the
period. This seems to be a continuing
trend into 2022.
Energy transition
During 2021, we saw further agreement
amongst world bodies of the need for a
meaningful and thought-through energy
transition. This developed throughout the
year, with many businesses and countries
setting ambitious targets for net-zero
emissions. Similarly, we also saw an
increased scrutiny on new hydrocarbon
developments such as Cambo in the
North Sea. This has now led to new
developments in the North Sea moving
towards needing an environmental
justification, in addition to an economic
one, before they are developed. This
trend was set to continue in the UK, with
Focus on the energy transition heightened
in the lead up to the COP26 conference,
hosted in Glasgow, which saw further
discussion amongst nations regarding
how best to tackle the looming issue of
climate change. Of key importance at
the conference was the role of methane
emissions on climate change, which the
oil and gas industry has been focused on
for many years. Similarly, the conference
recognised the importance for less
reliance on coal as a power source for
growing economies and saw nearly 200
countries agreeing the Glasgow Climate
Pact. This pact asks that all of the 200
countries agree to keep global warming
under 1.5°C and to accelerate action on
climate change this decade.
United are acutely aware that our industry
is facing increasing demands to clarify
the implications of energy transitions
for their operations and business model,
and to explain the contributions that they
can make to reducing greenhouse gas
emissions and to achieving the goals of the
Paris Agreement. Our position statement
outlines our stance on Climate chance and
the energy transition, see page 9.
Oil price
In line with the recovery of the global
economy and the cancellation of travel
restrictions, demand for oil increased
by 5.7mmbbls/d during the period.
This, combined with the significant
underinvestment in exploration over prior
years and OPEC+ retaining production
restrictions policies which it had
implemented during April 2020, we saw
supply not meeting the increasing demand.
As a result, during 2021 average oil prices
during the period increased to $71 per
barrel, up 64% on 2020.
This supply issue was most evident
during the tail end of the year, where we
saw a significant increase in both oil and
European gas prices, again, because of
a lack of investment in new production
opportunities.
United sought to dynamically adjust its
strategy to benefit from this increase
in oil price, drilling multiple wells at its
assets in Abu Sennan with the target
of increasing the total oil production
of the Company. During the period, the
Company averaged a realised price per
barrel of $68.90/bbl, representing an 82%
increase on previous years.
11
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Chief Executive Officer’s Review
12
United Oil & Gas PLC All five Egypt wells
were successful
During 2021 United’s focus has been to reshape the portfolio via divestment
of non-core assets work with the Joint Venture (JV) partners to increase and
proactively manage production from Abu Sennan, and further strengthen
the business through the pursuit of organic and inorganic opportunities to
build scale. We have also worked on moving forward the Jamaica farm-out
process following the extension of the exploration licence and we continue to
manage the business with a focus on capital and cost discipline.
Dear Shareholders,
COVID-19 and our response
The health, safety and wellbeing of
our employees, contractors and all our
stakeholders is a priority for United. As
the global pandemic continued in 2021,
the Joint Operating Company ('JOC')
in Egypt, continued with the measures
in place to minimise the risk of any
COVID-19 outbreak and procedures such
that mitigation measure were in place
to ensure the impact of any outbreak
could be quickly contained. There was
no disruption to the operations in Egypt.
Our head office staff continued to work
remotely in line with government directives
with negligible disruption to our business.
Egypt success
Our Egyptian portfolio includes
exploration, production, and development
opportunities in the Abu Sennan licence.
There are currently eight producing
fields. Production in 2021 averaged 2,327
boepd (2020: 2,195 boepd). In 2021 we
drilled five wells in total: two exploration
and three development wells. The two
exploration wells ASD-1X and AS1-1X
were commercial discoveries and the JV
partners were granted two new 20-year
development leases covering the new
discoveries. The development wells,
ASH-3, AJ-8, and AJ-13 also encountered
oil. All five wells were successful,
replacing reserves and accelerating
production of existing reserves. They
were brought into production within short
timeframes, adding immediate cashflow
to the Company, and all of the wells
demonstrated exceptionally short payback
periods of 3-12 months. The sub-surface
information gathered from the wells
further de-risks future exploration. While
JV partners had originally planned to drill
four wells based on the success of the
initial drilling programme and the increase
in commodity price the JV partners
added the AJ-13 development well to the
programme making it the fifth and final
well of the 2021 drilling campaign. This
flexibility and adjustment to the drilling
programme allows the JV partners to
capitalise when oil prices are high and also
allows us to adjust the drilling programme
in a low oil-price environment.
Operational challenges and
remedial work
Operationally 2021 was not without its
challenges. In the latter part of 2021, the
wells in one of the producing fields, ASH,
started to experience an increase in the
proportion of water to oil being produced
(water-cut) and associated decline in
production. As a result, the Company
revised its full-year guidance for the
Abu Sennan licence from 2,500-2,700 to
2,100-2,300 boepd. Although this was
disappointing, the technical team now
have more data and information on how
the reservoir functions and can use this
information to optimise future drill targets.
Since the beginning of September 2021,
decline of the production and the increase
in water-cut has been stable, and United
modestly exceeded the revised guidance.
Electrical Submersible Pumps ('ESP') will
be installed in all three producing wells
located in the ASH field as part of the
2022 work programme. The ESPs will be
aiming to maintain the flow rates, optimise
production and extend the life of field.
13
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Chief Executive Officer’s Review
continued
A producing, cash
generative business
Refocusing our portfolio
I am pleased with the progress the
Company has made during 2021.
Following a review of the Company's
portfolio we began the process to divest
our non-core assets in Italy and the UK
Central North Sea. Since year-end we
have made further progress. We have
completed the Italy divestment. We
also agreed a settlement regarding the
Crown milestone payment. These two
transactions will bring in approximately
$5m in aggregate and we will be re-
investing the proceeds to support growth.
We decided to terminate the UK CNS deal,
and we look forward to evaluating further
commercialisation opportunities in an area
of significant development activity when
oil prices are at a seven-year high.
The Company’s portfolio is re-focused on
the cash generative Egyptian producing
asset and the high-impact exploration in
Jamaica and a development asset in the
UK, which gives us a strong platform for
organic growth.
2022 production guidance
Average production for the first quarter
of 2022 was 1,567 boped net, well within
the guided range of 1,500-1,650 boepd for
H1. The H1 production guidance range of
1,500-1,650 boepd has now been extended
to the full-year 2022. A prudent approach
has been taken to provide this full-year
guidance, which includes production
from the current wells declined in line
with historic trends, production from
Al Jahraa-14 commencing in Q3 and
production from ASH-5 commencing in
Q4. No production additions have been
included for the two exploration wells that
are planned for 2022.
Jamaica progress
We were delighted to report that United
was granted a two-year extension to the
Initial Exploration Period of the Walton
Morant Licence, Jamaica, by the Jamaican
Cabinet. The Initial Exploration period
will now run to 31 January 2024. The
support of the Government of Jamaica
has been excellent and reflects our strong
relationship and the positive outlook
for the industry in Jamaica. United has
done extensive technical work on this
asset, which has over 2.4 billion barrels
of unrisked oil potential and the basin-
opening Colibri prospect at a drill-ready
stage. The extension allows us to continue
the farm-out process with confidence as
we look for an investment partner(s) to
unlock the vast potential in this region.
Environmental, Social, Governance
United is committed to conducting business
in a safe and responsible manner to deliver
long term growth. We are working with
the operator in Egypt to identify, quantify
and categorise our emissions. Once we
establish a baseline, we will work with our
JV partners to consider initiatives that may
help to reduce emissions. Our community
and social investment programmes focus
on capacity building, health and education.
In 2021 United sponsored the Capacity
Building Feature at the Upstream Technical
Convention in Egypt. United also supporting
the Al Amal mentorship programme for
over 40 students. Further information can
be found in the Corporate Responsibility
Report on pages 44.
Multiple growth opportunities
United has several growth opportunities
in its current portfolio and looks to
complement this growth with inorganic
growth to build scale. Egypt is a dynamic
and growing economy, providing a stable
business environment. In Egypt, we have
an asset with high-quality oil production
operations, development and exploration
upside, and our current organic growth
opportunities include near-term
development from existing resources and
low-risk exploration. The 2022 drilling
programme has started and consists of
both development and exploration wells.
The exploration wells, ASF-1X and ASV-
1X,will target combined mean recoverable
resources estimated by United in excess
of 10 mmbbls gross. This is five times
the mean recoverable resources that the
JV partners targeted in 2021. The two
exploration wells that will be drilled in
14
United Oil & Gas PLC refocused portfolio as a platform from
which to grow the business through
organic opportunities within our current
portfolio and new business opportunities.
We are confident that our continued focus
on long-term growth will generate value for
our shareholders. I would like to thank our
shareholders and stakeholders for their
continued support throughout the period.
Brian Larkin
Chief Executive Officer
25 April 2022
2022 are part of a wider portfolio of over
20 exploration prospects and leads at
Abu Sennan. We look forward to building
on the impressive returns to date and
optimising production from this licence in
the years to come.
In Jamaica the sentiment to exploration
and recovery of the investment cycle is
returning due to higher commodity prices,
the expectation that the energy transition
will take time, and the recent discoveries
in new basins such as Namibia and
Morocco. We are encouraged by the
interest shown in our farm-out process so
far and we look forward to pursuing this
significant opportunity.
Our people
Another year of the global pandemic has
meant the lives of individuals across the
globe continue to change in extraordinary
ways. As variants of COVID-19 developed
and lockdowns across the world occurred
our colleagues had to keep adapting their
working environments to working from
home. I wish to add my own thanks to the
staff at United for all their commitment,
enthusiasm and energy.
Outlook
We are focusing on near term-value adding
activities in Egypt, which have potential to
generate additional free cash flow, and on
the longer-term prospects in Jamaica.
There are extensive growth opportunities
remaining in the Abu Sennan licence, as
demonstrated by the drilling success so
far, and it has the potential to deliver large
reserve and production upside.
Our Egypt production base continues to
deliver operational cashflow, and this,
combined with our portfolio management
initiatives, ensure that United remains in a
strong position to execute our strategy.
We enter 2022 as a producing, cash
generative business, with a complementary
portfolio of low-risk development and
exploration in Egypt, with the potential
of high impact exploration in Jamaica
and a development asset in UK with
commercialisation opportunities. We
have had a great start to the year, with the
encouraging result achieved on the first
well in the 2022 drilling campaign. We were
also pleased to finalise a Crown milestone
settlement agreement and complete the
divestment of our Italian assets which will
bring in c. $5m of proceeds.
United has a balanced portfolio, we
have a constant focus on cost control,
and careful investment of our capital to
maximise returns for our stakeholders.
With an entrepreneurial management
team and a diverse, experienced Board,
we can leverage on our extensive industry
relationships and knowledge to use our
15
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Investment Case
A focus on
future growth
1/
Value
opportunity
Oil prices at a seven-year high
2/
Managed risk
across portfolio
Producing business, generating
cash with development and
exploration upside
16
United Oil & Gas PLC 3/
Portfolio
of organic
opportunities
Egypt
• Production and cash generative
• Clear path to near term low-cost low-
risk production and exploration growth
• 100% Exploration success rate in Egypt
since United entered the licence
Jamaica
• Long term upside potential
• 2.4 billion barrels unrisked mean
prospective resources across the basin
UK
• Maria discovery close to existing
infrastructure
• Located in a highly prospective area of
the Central North Sea
• 6 million barrels mid-case recoverable
4/
Growth ambitions
via further
inorganic growth
Demonstrated by Egyptian acquisition
5/
Disciplined capital
allocation and
flexiblity, low G&A
• Work programme funded by
operating cashflow
• Proportional spend on exploration
and production
resources
• Low capex commitments
Underpinned by:
/ Experienced Board and entrepreneurial Executive team
/ Strong balance sheet
/ Commitment to running a responsible business
/ Strong subsurface, commercial and technical capabilities
17
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Business Model
Our business model
is to deliver value for
stakeholders
What we need to execute our business model
What we do
Our people, our strengths and capabilities
We rely on our people; their experience and diverse skill sets to
deliver for our stakeholders. We have;
• Business ethics and integrity.
• Highly skilled subsurface, commercial, finance and investor relations teams who have
considerable experience with capital markets and in supporting local management.
• A track record of delivery.
• Strong industry relationships.
Our assets/portfolio
We have a full cycle oil & gas portfolio and work programmes on our
assets actively unlocking value.
•
In Egypt we have production and organic growth potential through discovered reserves
and resources and existing field exploration options. 2P numbers are 13.3 mmboe
gross, 3.0 mmboe net and United estimate net unrisked summed mean recoverable
resources of 10.4 mmboe contained within over 30 identified prospects and leads.
•
In Jamaica, we have an estimated 2.4 billion barrels unrisked mean prospective
resources across the basin.
• We actively manage our portfolio to achieve best commercialisation opportunities at
the right time of our current portfolio.
• We look to also grow by pursuing new venture opportunities that meet our
investment criteria.
• We commit to working responsibly across all our activities. This means working in a
safe, secure, environmentally, and socially responsible manner.
Financial Flexibility
We apply strict capital discipline and investment criteria to our
investment decisions and actively manage our portfolio to optimise
capital allocation
• We have a capital allocation policy of 90:10, with 90% of our capital focussed on
growing our producing business and 10% on high impact exploration assets.
• Our producing asset has a very low operating cost by industry standards.
• Work programmes for our current portfolio are funded by cash generated from our
producing assets.
• We have access to capital markets and have established relationships with debt and
equity providers.
18
Produce, develop,
and explore
Grow
Monetise
United Oil & Gas PLC We are an oil and gas company. United’s business model is to hold assets
within the oil and gas life cycle to deliver value for stakeholders. The cash
flow from our production funds our work programmes. We review our
portfolio regularly and our assets are monetised at different stages of oil
and gas exploration, development and production to optimise the portfolio
and value creation.
Responsible value creation
We drill wells with our Joint Venture
Partners on existing discovered
reserves and resources to produce oil
and gas. We maximise returns through
our low-operating costs and optimising
production. We explore for oil and gas
in our existing licences. We conduct
operations responsibly and safely.
We are committed to making a positive
contribution, wherever we do business by
delivering tangible benefits to our stakeholders.
This includes the value distributed through
salaries, taxes, payments to authorities,
contractors and suppliers, capital spending and
social investment.
Shareholders and financing partners
• Oil and Gas revenue and cashflows.
Employees
• Zero incidents recorded for LTI’s.
• Salaries and benefits.
Business partners and suppliers
• Joint operating company has contributed to national economic growth
through local sourcing, employment and using local suppliers.
Governments and regulators
• Payments to Governments via royalties, taxes and levy’s.
• 100% oil and gas produced is sold domestically.
Local Community investment
• Social Investment into capacity building.
• Joint operating companies, have contributed to national economic
growth through local employment, training and industry upskilling.
Organic growth through disciplined
and careful reinvestment into existing
assets that will generate value
(drilling, work programmes, workovers,
operational efficiencies)
Inorganic growth via acquisitions with
a focus on production and a small
proportion of high impact exploration.
We have a track record of creating
significant growth and value
demonstrated through our acquisition
of the Abu Sennan, Egypt licence.
We have the ability to move quickly to
pursue opportunities.
We assess our portfolio regularly
and look for commercialisation
opportunities that can be monetised
at different stages of oil and gas
exploration, development, and
production.
19
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Review of Operations
Two new exploration
discoveries
Introduction
There was a significant amount of
operational activity for United in 2021.
In Egypt, the run of success experienced
with the drill-bit since United acquired the
licence continued, with successful results
from all five of the wells drilled in 2021 –
including two new exploration discoveries
that were rapidly brought onstream. This
brought the number of fields in production
on the Abu Sennan licence up to eight,
delivering record-high full-year average
production of 2,327 boepd net.
In Jamaica, as well as the good progress
that was made with the continuing work
programme, the granting of a two-year
extension to the Initial Exploration Period
of the Walton Morant licence puts United
in a strong position to take advantage of
the positive sentiment that is returning to
exploration and progressing the farm-down.
20
United Oil & Gas PLC
Walton Morant Licence
Offshore Jamaica
The Walton Morant Licence covers
an extensive area (c. 22,400 km2)
and contains numerous follow-up
structures which could be significantly
de-risked by an initial drilling success
at Colibri.
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Countries
Licences
Oil & Gas Fields
Acreage Km2
3
5
8
23,980
P2519 Licence (Maria)
Offshore UK
In September 2020, United Oil &
Gas was provisionally awarded
100% interest in Licence P2519
containing the Maria discovery. The
award of the licence was confirmed
in January 2021.
Abu Sennan Concession
Onshore Egypt
In early 2020, United Oil & Gas completed
the acquisition of Rockhopper Egypt
Pty, which included a 22% non-operating
interest in the Abu Sennan Concession.
Located in the prolific hydrocarbon-
producing Western Desert region of
onshore Egypt, it comprises seven
Development Concessions.
Production
Development
Appraisal
Exploration
2021 Annual Report and Financial Statements
21
Review of Operations
continued
Egypt
Abu Sennan
Egypt (22% non-operated working interest, operated by Kuwait Energy Egypt)
The Abu Sennan licence is located in the Western Desert, onshore Egypt, c.200km west
of Cairo. United acquired its 22% working interest in the licence in April 2020. The licence
offers low-risk development and exploration. The entirety of the Abu Sennan licence area
of 644 km2 is covered by existing 3D seismic data, with multiple exploration prospects
and leads identified in what has proven to be a prolific petroleum basin. There are eight
producing fields the largest of which are the Al Jahraa and the ASH fields.
22
United Oil & Gas PLC
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Net Production
2,327
boepd
Production
Full-year 2021 production averaged 2,327
boepd net (1,869 bopd oil and 458 boepd
gas) (2020: 2,195 boepd), slightly above
the production guidance of 2,100-2,300
issued on 6 September 2021.
This production is split between eight
separate fields, and although there were
issues with increased water-cut at the
ASH field in the beginning of Q3 2021,
production from Abu Sennan remained
stable through the second part of Q3 and Q4.
2021 Abu Sennan work programme
The 2021 work programme at Abu Sennan
consisted of five wells and six workovers.
All five wells encountered oil and were
quickly brought into production.
The drilling programme began with the
ASH-3 development well. This reached
total depth (TD) of 4,087m in February,
and encountered 27.5m of net pay in
the Alam El Bueib (AEB) reservoir. It was
brought onstream at gross rates of over
3,000 bopd in early March, achieving
payback in less than three months.
This was followed by the ASD-1X
exploration well. This reached TD of
3,750m in March, and encountered 22m
of net oil pay in Abu Roash, Bahariya and
Kharita reservoirs. ASD-1X was announced
as a commercial discovery on 4 May
and after approval was granted from the
Minister of Petroleum for the award of
a 20-year development lease covering
the new discovery, it was brought into
production on 26 May with average flow-
rates of c. 600 bopd, less than two months
after the initial well results.
The third well in the 2021 drilling
programme was the Al Jahraa-8
development well, which was side-
tracked to a TD of 4,314m in July. The
side-track encountered over 40m of net
oil pay across three different reservoir
units including over 30m of net pay in
the Upper and Lower Bahariya reservoirs,
significantly above pre-drill expectations.
The well was brought onstream during
August, with gross initial flow rates in
excess of 950 boepd.
The fourth 2021 well was the ASX-1X
exploration well. This reached TD of 4,272m
in September, encountering over 10m of
net pay in a new commercial discovery.
Approval was granted from the Minister
of Petroleum for the award of a 20-year
development lease over the new discovery
in October, and the Abu Roash C reservoir
was brought onstream at an initial gross
production rate of 870 bopd - just three
weeks after the initial drilling results
A fifth well, the Al Jahraa-13 development
well, was added to the 2021 programme in
September. The well reached TD of 3,840m
on the 15 December, and encountered
17.5m of net pay in the Upper and Lower
Bahariya. The well was brought onstream
on the 11 January 2022 at gross flow-rates
of c.600 bopd. This led to the Al Jahraa
field becoming the largest producing field
on the licence.
2021 Annual Report and Financial Statements
23
Review of Operations
continued
Egypt
Abu Sennan
2022 work programme and
production guidance
Average production for the first quarter
of 2022 was 1,567 boped net, well within
the guided range of 1,500-1,650 boepd for
H1. The H1 production guidance range of
1,500-1,650 boepd has now been extended
to the full-year 2022. A prudent approach
has been taken to provide this full-year
guidance, which includes production
from the current wells declined in line
with historic trends, production from
Al Jahraa-14 commencing in Q3 and
production from ASH-5 commencing in
Q4. No production additions have been
included for the two exploration wells that
are planned for 2022.
The 2022 approved work programme
consists of five firm wells (three
development and two exploration wells)
and eight workovers. The fifth well was
included in the programme following the
results of ongoing technical studies, and
is planned to be the Al Jahraa-14 ('AJ-14')
development well. The workovers planned
for 2022 will include the installation of
Electrical Submersible Pumps ('ESPs')
in all three producing wells located in
the ASH field. The ESPs will be aiming
to maintain the flow rates, optimise
production and extend the life of field, and
two of these have already been installed.
Seismic reprocessing of a 452km2 area
of the Abu Sennan 3D seismic volume
is currently nearing completion. This
reprocessing work will cover the ASH field
and neighbouring AEB targets, as well as
the ASF prospect (to be drilled in 2022).
Additional seismic reprocessing in the
north-east of the licence area is planned to
be carried out later in 2022.
The drilling programme commenced
in late January 2022 with the ASD-2
development well. This was drilled to
test the north-western culmination of the
ASD field discovered last year, and safely
reached TD of 3,631m in March. The well
encountered at least 25.5 metres of net
pay and was brought onstream less than
six days after completion at an initial gross
rate of c. 2,100 bopd.
24
United Oil & Gas PLC
In March, United announced that the
second well in the 2022 programme
would be the ASV-1X exploration well,
which spud on the 14 April. The ASV-1X
exploration well is a high impact well,
targeting unrisked mean recoverable
resources estimated by United at c.2.6
mmbbls gross. The primary targets are
Abu Roash reservoirs, similar to those
currently in production at the Al Jahraa
field. A secondary target will be tested at
the deeper Kharita level.
This AJ-14 development well is
planned to be the third well drilled in
2022. This will be followed by ASH-5,
a development well to be drilled in the
ASH field, targeting the prolific Alam El
Bueib ('AEB') reservoirs that have so far
delivered in excess of 3.5 million barrels
of oil from the field.
Analysis of the ASH field incorporating
the results of the ASH-3 well indicates
a large in-place oil volume estimated
by United to be in the range of 14-16
mmbbls gross, with significant potential
remaining within the structure. Seismic
reprocessing is currently underway to
ensure that this development drilling is
located optimally in the field.
The fifth and final well in the 2022
programme is the ASF-1X exploration
well. The ASF-1X well has been high-
graded by United, and will target unrisked
mean recoverable resources estimated
by United at c.8 mmbbls gross in the AEB
and Abu Roash reservoirs to the south-
west of the ASH field. The well location
will be finalised using the reprocessed
seismic data.
Jamaica
Walton Morant
In Jamaica, United holds a
100% working interest in
the Walton Morant licence.
ready, high-impact Colibri prospect alone
contains mean prospective resources of
406 mmbbls.
amended Production Sharing Agreement
was received in January 2022. The Initial
Exploration period will now run to 31
January 2024.
This is a 22,400 km2 offshore
exploration licence, located
to the south of the island
of Jamaica. It offers a high-
impact frontier exploration
opportunity with the potential
to open an entirely new
hydrocarbon frontier.
With extensive seismic data coverage,
including 2,250 km2 of 3D data, numerous
plays and prospects have already been
identified and mapped across the area –
leading to over 2.4 billion barrels unrisked
mean prospective resources being
assigned to the licence. Indeed, the drill-
The results of the work programme carried
out in 2021 have enhanced understanding
of regional source rock development,
quantified the basin-wide potential, and
demonstrated robust economics based
on an independent assessment of viable
development options for the high-graded
Colibri prospect.
A formal farm-out campaign was
launched in April 2021, assisted by Envoi,
a specialist Upstream Acquisition and
Divestment advisory group. In November
2021 United announced that the request
for a two-year extension to the Initial
Exploration Period of the Walton Morant
Licence was granted by the Jamaican
Cabinet. Final signature from the Ministry
of Science, Energy and Technology to the
The extension allows us to continue the
farm-out process with confidence as we
look for an investment partner(s) to unlock
the vast potential in this region.
Unrisked mean
prospective resources
2.4 bn bbls
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2021 Annual Report and Financial Statements
25
Review of Operations
continued
UK
P2480 and P2519
United holds a 100%
working interest in the
P2519 and P2480 licences.
Licences P2519 (Maria)
and P2480 (Zeta) cover a
combined area of c.725km2
in the Outer Moray Firth
Basin of the UK Central
North Sea (CNS).
Maria
Licence P2519 includes Blocks 15/18e and
15/19c and covers an area of c. 225 km2.
The licence contains the existing Maria
discovery in the Forties Sandstone, drilled
by Shell/Esso in 1976. United estimated
as part of its licence application that Maria
holds c. 6 mmboe mid-case recoverable
resources. The P2519 Licence also contains
two Jurassic discoveries, Brochel and Maol.
Maol was drilled by Shell in 1987, and on
test flowed at over 2,000 boepd.
Previous analysis suggests that
the commercial threshold for oil
developments with proximity to
infrastructure in this part of the North
Sea is c. 4-5 MMbbls, indicating that a
viable development should be possible,
and indeed these economics are likely to
be further enhanced in light of the recent
increase in commodity prices.
During the first- half of 2021 progress was
made on the work programmes associated
with the licences: new 3D seismic data
was purchased and interpreted, with
the initial mapping providing positive
indications on the existing Maria, Brochel
and Maol discoveries, and on the identified
prospectivity, including Zeta, Dunvegan,
and the deeper Jurassic targets.
In September 2021, the Company
announced that it had entered into a
binding sale and purchase agreement
('SPA') with Quattro Energy Limited
(Quattro) to sell its UK Central North Sea
Licences. Completion of the sale was
conditional on receipt of approval from the
Oil and Gas Authority (OGA) and Quattro
completing a fundraising process. OGA
approval was received, however, Quattro
did not complete a fundraising process by
the long stop date (28 February 2022). In
Mach 2022 United terminated the SPA with
Quattro and have retained the licences as
part of the Company’s portfolio.
Both licences are located in a highly
prospective area of the CNS, where there
is significant development activity taking
place. They are situated close to existing
infrastructure as well as the Marigold and
Yeoman discoveries, and the substantial
Piper, MacCulloch and Claymore oil fields.
There are low-cost commitments on
both licences, and with rising commodity
prices and renewed activity in the nearby
area United believes they each contain
attractive investment opportunities.
United look forward to progressing the
commercialisation opportunities and
potential partnerships the assets offer.
26
United Oil & Gas PLC
Waddock Cross (26.25% working
interest, non-operator )
Licence PL090 containing the shut-in
Waddock Cross Field is situated c. 11km
to the east of Dorchester, in the onshore
Wessex Basin, UK.
The operator, Egdon Resources U.K.
Limited has updated the modelling for the
shut-in field, demonstrating that a possible
phased redevelopment of Waddock Cross
would be commercial. A Final Investment
Decision is expected to be made by the
end of 2022. Waddock Cross remains non-
core, and United are continuing to review
alternatives for this asset.
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Italy
Selva
(20% working interest, non-operator)
United has completed the sale of 100% of
the share capital of UOG Italia Srl PXOG
Marshall Limited, a subsidiary of Prospex
Energy PLC ('Prospex'), for a consideration
of €2.165m (c. $2.54m) with an effective
date of 1 January 2021.
Health, Safety and Environment
While United had no field activity in
2021 in which we were the operator, we
continued to work with our Joint Venture
partners and as part of the Joint Operating
Company (JOC) in Egypt. Measures
were in place to minimise the risk of any
COVID-19 outbreak and procedures were in
place to ensure the impact of any outbreak
could be quickly contained. There was no
disruption to the operations in Egypt.
Our operator in Egypt maintained another
year of zero Fatalities, Medical Treatment
Cases, Restricted Work Injuries and a
zero rate for Lost Time Injury frequency
and Total recordable incidents frequency
or environmental spills. There were
three motor vehicle incidents with no
harm to the drivers. All incidents were
investigated, and lessons learned as
appropriate and actions to prevent
recurrence were implemented. There was
also a fire incident, during the periodic
maintenance of a plant generator by
a contractor's technician. The trained
team at the gas plant quickly controlled
the fire using fire extinguishers. The
preliminary investigation revealed that the
fire caused by damaged insulation of the
electric cable of the motor oil charging
pump. The fire resulted in damage to
the generator and minor injury on the
hand of the contractor's technician. A
detailed investigation will be carried out
to understand mitigation measure and
lessons learnt.
Group reserves and resources
Country
Asset
Working Interest
Net 2P Reserves
(mmboe)
Net 2C Resources
(mmboe)
Egypt
Jamaica
UK
UK
UK
Abu Sennan1
Walton
Morant
Maria
Zeta
Waddock
Cross
22%
3.01
-
100%
100%
100%
26.25%
-
-
-
6.13
-
-
-
0.4 4
Total
3.0
6.5
Net Prospective Resources 5
(mmboe)
10.43
2,4212
-
27.53
2.3 3
2,461.2
1 ERCE reserves report, April 2022. Reserves of 3.0 MMboe are Net Working Interest and do not represent the Net Entitlement share of future production
legally accruing under the terms of the development and production contract.
2 GaffneyCline & Associates report, December 2020; Summation of Walton Morant Prospective Resources completed by United .
3 Figures based on United interpretation and calculations.
4 ERCE Competent Persons Report, December 2019.
2021 Annual Report and Financial Statements
27
Financial Review
A stable platform
for growth
United’s Financial Strategy underpins the business strategy and
is founded on three core principles: capital discipline, financial
management and risk management.
The existing portfolio is funded entirely from operating cashflow, and we
have further strengthened the balance sheet since the start of 2022 via
the refinancing of our prepaid swap facility, the agreement on the Crown
milestone payment and the completion of our Italian divestment. Our
balance sheet provides a stable platform for growth from both organic
opportunities and via new business development opportunities. Our
cash operating costs are low by industry standards and we are fully
leveraged to benefit from the current high oil price environment.
28
United Oil & Gas PLC Revenue
19.2
$m
Cash Opex
5.9
$/boe
Gross Profit
12.2
$m
Profit After Tax
4.1
$m
Financial results summary
Net average production volumes (boepd)
Oil price realised ($/bbl)
Gas price realised ($/mmbtu)
Revenue
Gross profit
Cash operating cost per boe3
Exploration costs written off
Impairment of property, plant and equipment
Profit after tax
Basic profit per share (cents)
Cash capex
EBITDAX3
Operating cashflow
1 Amounts stated are for the 10 months from completion date of Egyptian Acquisition
2 22% interest net of government take
3 See Non-IFRS measure
2021
2,327
68.90
2.63
$19.2m
$12.2m
$5.90
$0.4m
$0.6m
$4.1m
0.64
$5.5m
$13.6m
$9.1m
20201
2,195
37.76
2.63
$9.1m2
$2.5m
$5.77
$0.3m
-
$.9m
0.15
$2.5m
$3.5m
$4.8m
29
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Financial Review
continued
Group Production and Commodity
Prices
Total group working interest production
2021 was 2,327 boepd an increase of 6%
for the year (2020: 2,195 boepd for ten
months). The Group’s average realised
oil price was $68.90/bbl representing an
increase of 82% on the prior year, and the
average (fixed) gas price was $2.63/mmbtu.
Group revenue for the year totalled $19.2m
representing an increase of 110% on the
prior year largely down to higher commodity
prices and also increased production.
Revenues from the Abu Sennan concession
are stated after accounting for government
entitlements under the production sharing
contract. Crude oil from Abu Sennan is sold
as Western Desert Blend and the average
discount to Brent was $1.85/bbl.
Group Operating Costs
Group cash operating costs were $4.9m
(2020: $3.9m) an increase of $1.0m on
the prior mainly due to an additional
two months reported in 2021 and higher
production during the year. The cash
operating cost per barrel of $5.90/boe
remains largely unchanged in 2021 (2020:
$5.77/boe) which demonstrates the
efficiency of our Egyptian assets.
Group DD&A
Group DD&A associated with producing
and development assets amounted to
$4.0m (2020: $2.6m). DD&A per boe is
currently $4.70/boe.
Administrative Expenses
Administrative Expenses for the year
totalled $3.4m (2020: $1.7m) Adjusting
for the non-cash items under IFRS 2 Share
Based Payment and IFRS 16 Leases, the
administrative expense is $3m (2020:
$1.4m). This included $0.4m on new
venture activity relating to the evaluation
of business development opportunities,
a write-down of $0.39m relating to the
Crown milestone agreement of $2.5m and
the carried receivable was $2.85m a and
a net impairment charge on development
assets of $0.6m (2020: $Nil) relating to
the Waddock Cross asset in the UK. The
gain on non-current assets held for sale
of $0.1m relates to the divestment of the
Italian business.
Profit post tax
The profit for the year from continuing
operations and prior to any exceptional
costs was $4.1m (2020: $0.9m).
Divestments
During 2021 the Group signed conditional
sale and purchase agreements (SPA’s) for
the disposal of the share capital of UOG
Italia Srl for a consideration of €2.165m (c.
$2.54m) with an effective date of 1 January
2021 and to sell its UK Central North Sea
(UK CNS) Licences; P2480 and P2519 for
a consideration of up to £3.2m (c. $4.4m).
On 28 February 2022 the SPA for the sale of
the UK CNS licences was terminated. The
assets and liabilities of UOG Italia Srl are
held as assets for sale on the balance sheet
as at 31 December 2021. This divestment
completed on 8 April 2022.
Derivative financial instrument
The Company’s pre-payment facility
with BP provided downside protection
by effectively hedging a volume of
bbls of oil at $60/bbl per month for a
thirty-month term from March 2020
through to September 2022. As at 31
December 2021, an unrealised loss of
$1.5m has been recognised as a result
of oil price movements in the period.
On 31 January 2022 the Company and
BP extended the maturity of this facility
until 31 December 2023 to create further
financial flexibility for the Company. The
new terms provide downside protection
at $70/bbl for a volume of bbls through
to end December 2023.
Taxation and Other Income
The Egypt concession is subject to
corporate income tax at the standard rate
of 40.55%. However, responsibility for
payment of corporate income taxes falls
upon EGPC on behalf of UOG Egypt Pty
Ltd. The Group records a tax charge with
a corresponding increase in other income
for the tax paid by EGPC on its behalf. Due
to accumulated tax- deductible balances
there was no tax due in the prior period.
Cash flow
Net cashflow from continuing operations
amounted to $9.1m (2020: $4.8m). An
increase/decrease of 90% compared
to 2020. Cost control and liquidity
management both served to protect the
cashflows. A significant year end revenue
receipt of $0.8m was not received at our
bank until 2 January 2022 and hence is not
reflected in the year end cash balance.
Capital investment
Total capital expenditure on continuing
operations for the year amounted to
$5.5m (2020: $2.5m); with $2.3m incurred
on the two successful development
wells, $2.7m on other exploration,
development and infrastructure projects
in Abu Sennan. The remaining $0.5m
was invested in other assets across the
remainder of the portfolio.
The company will continue to focus
on capital discipline with 2022 capital
investment largely directed at maximising
value from the Group’s producing assets.
The Group’s cash capital expenditure for
the full year is forecasted to be approx.
$6m, fully funded from existing operations,
with circa $5.5m to be invested in Egypt
and up to $0.5m across the other assets in
the portfolio.
Balance sheet
Intangibles Assets additions during the
period amounted to $3m and were then
reduced by both a transfer of Exploration
success wells at both ASD 1X and ASX
1X amounting to $2.5m in total, and the
transfer of Italian assets for divestment
to Assets Held for sale ('AHFS'), leaving a
closing Intangibles Balance Sheet position
of $5m comprised of $4.5m in Jamaica
and $.5m on our North Sea assets (2020:
$7.9m). Of the additions in 2021 $1.7m
relates to the two exploration campaigns
30
United Oil & Gas PLC in Abu Sennan, $0.9m was spent in
Jamaica on the Walton Morant licence
and the remainder of the movement
of $0.4m on other exploration assets
within the portfolio. The movement in
Property, Plant and Equipment was $4.4m
which represents spend on the five well
campaign, two exploration successes
transferred from Intangibles, and two
development wells plus additional facilities
and workovers on the Abu Sennan
producing assets in Egypt. Additions were
$8.5m in total, offset by $4m of DD&A
on a unit of production basis. Trade and
other receivables amounted to $7.7m
and included $5m of accrued income on
oil and gas sales plus $2.5m relating to
the Crown disposal milestone payment.
Borrowings at year end were $3.8m.
Going concern
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position
are set out in the Chair’s statement and
the Strategic Report.
United regularly monitors its business
activities, financial position, cash flows
and liquidity through detailed forecasts.
Scenarios and sensitivities are also
regularly presented to the Board, including
changes in commodity prices and in
production levels from the existing assets,
plus other factors which could affect the
Group’s future performance and position.
A base case forecast has been considered
which uses budgeted commitments and
prevailing forward curve assumptions
for oil prices. The key assumptions and
related sensitivities include a “Reasonable
Worst Case” ('RWC') sensitivity where the
Board has considered a scenario with
significant aggregated downside, including
a reduction in forecast production rates of
15%, a reduction in oil prices by 20% and
an increase in forecast capital expenditure
in Egypt by 10%.
Both the base case and RWC take into
consideration the Crown Milestone
Settlement Agreement for $2.5m and
the completion of the Italian divestment
for €2.2m in early 2022. The likelihood
of all these downside sensitivities taking
place simultaneously and lasting for the
entire forecast period is considered to
be remote. Under such a RWC scenario,
we have identified appropriate mitigating
actions, including the deferral of additional
uncommitted capital expenditure, further
divestment of the portfolio, restructuring
of debt arrangements and adjustment
of the Group cost base, which would
be available to us and have been
demonstrated as effective strategies in
previous periods of low oil prices. Our
business in Egypt remains robust given
cash operating costs of less than $6/boe,
flexible drilling contracts, downside price
protection on our hedged volumes and gas
contracts that are fixed price in nature.
There are limited capital commitments
in the other assets in our portfolio. The
forecasts outlined above show that
the Group will have sufficient financial
headroom for the 12 months from the
date of approval of the 2021 Accounts.
Based on this analysis, the Directors have
a reasonable expectation that the Group
has adequate resources to continue in
operational existence for the foreseeable
future. Therefore, they continue to use
the going concern basis of accounting in
preparing the annual Financial Statements.
Financial Outlook
United’s financial strength is founded
on our long-term approach to prudently
managing capital to generate value.
United has a streamlined portfolio of
assets which are funded from operating
cashflow. We have taken significant
steps to strengthening our balance
sheet and generate investment flexibility,
via the completion of two of our asset
divestments and extending the maturity
on our pre-paid swap facility with the
ongoing support of our debt provider BP.
The measures that we have taken and the
benefits of our stable low-cost production
benefitting from the prevailing stronger
commodity price environment ensures
that our balance sheet provides a stable
platform for growth from both organic and
inorganic opportunities.
31
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Principal Risks and Uncertainties
A consistent
approach to risk
United continuously monitors and assesses its Principal and Emerging risks
faced across the Company. During 2021, these risks particularly included
the evolving risk landscape during the COVID-19 pandemic and the global
macroeconomic/geopolitical environment. The Audit and Risk Committee
has delegated powers from the Board for oversight of Risk Management
including risk management assessment criteria, decision making on how to
increase the effectiveness of risk mitigations and oversight of the Group risk
register. The Audit and Risk Committee reports to the Board regarding the
adequacy of Risk Management measures ensuring that the approach to risk
is consistent with the Group’s strategy and risk appetite.
The Board has closely considered the potential impact of these risks and
related events on its corporate strategy, and stakeholders’ perspectives of
the Company.
Emerging risks
Within the Company Risk Management,
emerging risks are considered as part of
the identification phase. These are risks
that cannot yet be fully assessed, risks
that are known but are not likely to have an
impact for several years, or risks which are
unknown but could have implications for
the business going forward.
COVID-19 is an example of an emerging
risk which was identified in 2020 as
a known potential risk which was
challenging to fully assess. The ever
changing landscape of the global response
to COVID-19 and the implications this has
had on the industry was difficult to predict.
In response to the continued pandemic,
the Company has taken steps throughout
2021 to ensure the safety of our staff and
the continued delivery of our business-
critical activities. The Joint Operating
Company (JOC) in Egypt, continued with
the measures in place to minimise the risk
of any COVID-19 outbreak and procedures
such that mitigation measure were in
place to ensure the impact of any outbreak
could be quickly contained. There was
no disruption to the operations in Egypt.
Our head office staff continued to work
remotely in line with government directives
with negligible disruption to our business.
The speed of energy transition away from
fossil fuels are watched closely by oil
and gas independents. Climate change,
changes in public perceptions, investors’
attitudes, energy and climate policy,
carbon pricing and the development of
new technologies to reduce CO2 emissions
are all combining to change the landscape
for all oil and gas companies and this
emerging risk is a subset of the principal
risk of Climate change.
The following pages provide a summary
overview of the principal risks to the
Company at the end of 2021, the potential
impacts, causes and the mitigation
measures.
32
United Oil & Gas PLC Corporate Risk Marix
Plots the likelihood of each risk that the management believe could influence performance
High
d
o
o
h
i
l
e
k
L
i
5
4
3
2
1
4
5
1
6
7
3
9
8
2
Low
1
2
3
Impact
10
4
Strategic
1. Insufficient capital available to
complete further acquisitions in line
with growth strategy
2. Health, Safety, Environmental and
Social risk
3. Climate change and energy transition1
Financial
4. Commodity price risk
5. Liquidity risk for completion of
planned work programmes and
going concern
Operations
6. Unable to achieve production
targets / recover reserves
7. Misalignment of joint venture partners
causing impact on work programmes
and cash flow
Reputational
8. Reputational damage
9. Business conduct & bribery
5 High
10. Political / regional risk1
1 New risk added
These risks are similar to those faced by many companies in the oil and gas industry. A description of the principal risks, impact, cause and
mitigating factors and controls, are set out in the table on page 34. The risks in the table are not in order of priority nor is it an exhaustive list of
all risks that may impact the Group, but rather the Board’s view of principal risks at this point in time.
33
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Principal Risks and Uncertainties
continued
The principal risks and their mitigations are detailed below:
STRATEGIC
Risk
1.
Insufficient capital available to complete further acquisitions
in line with growth strategy
Impact
• Work programme restricted by reduced capital availability
• Inability to grow in line with growth strategy
• Failure to replenish the portfolio
• Loss of value
• Inability to replace reserves and sustain production levels
• Equity and debt markets reducing investment in oil and gas
• Regular review of funding options
• Pressure on capital providers to avoid fossil fuel projects
• Seek to ensure adequate returns are generated for investors
• Proactive discussions with equity and debt providers
Causes
activities
• Commodity Prices/Economic Conditions
• Geopolitical risks
Mitigation
2. Health, Safety, Environmental ('HSE') and Social risk
• Serious injury or death Environmental impacts Reputational
• HSE risks or environmental and safety incidents
• Better understanding and input into our Operator’s health and
damage
• Regulatory penalties and clean-up costs
• Operational outages leading to lower production
• Climate change impacts on the sector
safety processes and metrics
• Preclusion from activity due to Governmental / Societal view of
• Insurance procured to address insurable risks
industry
• Comply with all legislative/regulatory frameworks where
applicable
• Engage more widely to advocate the continuing importance of
the role of oil and gas in the global energy mix
• ESG Committee of the Board
3. Climate change and energy transition
• Providers of capital limit exposure to fossil fuel projects
• Climate-related policy changes
• Reputational damage
• Retaining and attracting talent
• Risk of additional impairment of assets
• Pressure on investors to divest out of fossil fuel companies /
• Using our influence with the Joint Venture ('JV') partner to
projects
• Inability to find economically viable CO2 reduction solutions
• Global transition to a lower carbon intensity economy Increased
identify emissions, and emissions reduction plan
• Building in a carbon intensity study and mitigations into any new
exploration development scenario
climate regulation and disclosure
• Increase in carbon taxes / decarbonisation charges
• Consumer sentiment, potentially causing radical /
transformational shifts in consumption of fossil fuels
• Increased frequency of extreme weather occurrences
FINANCIAL
Risk
4. Commodity Price risk
Impact
• Reduction in future cash flow
• Uncertainty in planning
• Inability to fund work programme or invest for growth
• Value impairment of development exploration projects
Causes
• Oil and gas market volatility
• Lower long-term prices
5. Liquidity Risk for completion of planned work programmes
and going concern
• Work programme restricted by reduced capital availability
• Inability to grow in line with growth strategy
• Loss of value
• Inability to replace reserves and sustain production levels
Mitigation
obligations
• Oil hedging framework in place which complies with lending
• Close monitoring of business activities and cashflows including
downside oil price scenarios
• Fixed price gas sales
• Capital discipline with focus on progressing investments that are
robust in a low oil price environment
• Capital Allocation ensuring robust investments are approved
• Active management of discretionary costs
• Effective cashflow forecasting and liquidity management
• Maintain effective systems and controls
34
United Oil & Gas PLC The principal risks and their mitigations are detailed below:
STRATEGIC
Risk
in line with growth strategy
Impact
Causes
Mitigation
1.
Insufficient capital available to complete further acquisitions
• Work programme restricted by reduced capital availability
• Equity and debt markets reducing investment in oil and gas
2. Health, Safety, Environmental ('HSE') and Social risk
• Serious injury or death Environmental impacts Reputational
• Inability to grow in line with growth strategy
• Failure to replenish the portfolio
• Loss of value
• Inability to replace reserves and sustain production levels
damage
• Regulatory penalties and clean-up costs
• Operational outages leading to lower production
activities
• Pressure on capital providers to avoid fossil fuel projects
• Commodity Prices/Economic Conditions
• Geopolitical risks
• HSE risks or environmental and safety incidents
• Climate change impacts on the sector
• Preclusion from activity due to Governmental / Societal view of
industry
• Regular review of funding options
• Proactive discussions with equity and debt providers
• Seek to ensure adequate returns are generated for investors
• Better understanding and input into our Operator’s health and
safety processes and metrics
• Insurance procured to address insurable risks
• Comply with all legislative/regulatory frameworks where
applicable
• Engage more widely to advocate the continuing importance of
the role of oil and gas in the global energy mix
• ESG Committee of the Board
3. Climate change and energy transition
• Providers of capital limit exposure to fossil fuel projects
• Pressure on investors to divest out of fossil fuel companies /
• Using our influence with the Joint Venture ('JV') partner to
• Climate-related policy changes
• Reputational damage
• Retaining and attracting talent
• Risk of additional impairment of assets
projects
• Inability to find economically viable CO2 reduction solutions
• Global transition to a lower carbon intensity economy Increased
identify emissions, and emissions reduction plan
• Building in a carbon intensity study and mitigations into any new
exploration development scenario
climate regulation and disclosure
• Increase in carbon taxes / decarbonisation charges
• Consumer sentiment, potentially causing radical /
transformational shifts in consumption of fossil fuels
• Increased frequency of extreme weather occurrences
FINANCIAL
Risk
4. Commodity Price risk
Impact
• Reduction in future cash flow
• Uncertainty in planning
• Inability to fund work programme or invest for growth
• Value impairment of development exploration projects
Causes
• Oil and gas market volatility
• Lower long-term prices
5. Liquidity Risk for completion of planned work programmes
• Work programme restricted by reduced capital availability
and going concern
• Inability to grow in line with growth strategy
• Loss of value
• Inability to replace reserves and sustain production levels
Mitigation
• Oil hedging framework in place which complies with lending
obligations
• Close monitoring of business activities and cashflows including
downside oil price scenarios
• Fixed price gas sales
• Capital discipline with focus on progressing investments that are
robust in a low oil price environment
• Capital Allocation ensuring robust investments are approved
• Active management of discretionary costs
• Effective cashflow forecasting and liquidity management
• Maintain effective systems and controls
35
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Principal Risks and Uncertainties
continued
OPERATIONAL
Risk
6. Unable to achieve production targets/recover reserves
Impact
Causes
Mitigation
• Future cashflow depend on production/ reserves
• Negative impact on asset value
• Liquidity issues
• Reputational damage
• Subsurface uncertainty and inaccurate field / reserves modelling
• Engagement of reputable reserves auditors with focus on
• Disruption to facilities / equipment (e.g., from adverse weather,
consistency and transparency
mechanical failure etc)
• Appropriate disclosures on reserves movements
• Lack of success from development drilling and field interventions
• Challenging technical engagement with Operators of Producing
• Over-reliance on single asset
7. Misalignment of joint venture partners causing impact on
work programmes and cash flow
• Cost/schedule overruns
• Poor performance of assets
• HSE performance
• Delay in oil from development projects Negative impact on asset
• Joint venture partners having different views on drilling and work
• Active participation in joint venture process
programme
• Financial capability of joint venture partners
• Manage own technical work and asset understanding
• Financial capability assessment on current and potential joint
REPUTATIONAL
Risk
8. Reputational Damage
9. Business Conduct & Bribery
10. Political / regional risk
value
Impact
• Loss of value
• Stakeholder relations breakdown
• Social licence to operate damaged
• Fines
• Criminal prosecution
• Reputational damage
• Higher operating costs
• Adversely effect operations
• Compliance and taxation
• Uncertain financial outcomes
36
Assets
of assets
• Timely production reporting from Operators
• Maintenance of company technical analysis and understanding
• Adequate technical resources in place
• Expand production base to spread production across a larger
number of assets
venture parties
Mitigation
Causes
issues
environments
and compliance record
• Geopolitical issues
• Sub-optimal capital allocation
• High grading opportunities based on clear financial metrics such
• Activities run by asset operators causing safety or environmental
as NPV, IRR and payback
• Present in countries in challenging regulatory and political
• Usage of in country and international professional advisers
• Transacting with counterparties with sub-optimal reputational
counterparties including external compliance reports
• Seek to maximise influence on operators of our producing assets
• Maintain a balanced portfolio across both oil and gas and
producing, development and exploration assets
• Active and regular dialogue with Shareholders
• Ensure adequate due diligence prior to on-boarding
• Annual training in anti-bribery and corruption
• Maintain positive relationships with governments and key
• Operations in challenging regulatory and political environments
stakeholders.
• Sudden changes to fiscal regimes
• Ongoing monitoring of the political and regulatory environments
• Government reform, political instability, civil unrest
in which we operate.
United Oil & Gas PLC • Negative impact on asset value
• Liquidity issues
• Reputational damage
Impact
• Loss of value
• Stakeholder relations breakdown
• Social licence to operate damaged
• Fines
• Criminal prosecution
• Reputational damage
• Higher operating costs
• Adversely effect operations
• Compliance and taxation
• Uncertain financial outcomes
REPUTATIONAL
Risk
8. Reputational Damage
9. Business Conduct & Bribery
10. Political / regional risk
OPERATIONAL
Risk
6. Unable to achieve production targets/recover reserves
• Future cashflow depend on production/ reserves
• Subsurface uncertainty and inaccurate field / reserves modelling
• Disruption to facilities / equipment (e.g., from adverse weather,
• Engagement of reputable reserves auditors with focus on
consistency and transparency
Impact
Causes
Mitigation
mechanical failure etc)
• Lack of success from development drilling and field interventions
• Over-reliance on single asset
• Appropriate disclosures on reserves movements
• Challenging technical engagement with Operators of Producing
Assets
• Timely production reporting from Operators
• Maintenance of company technical analysis and understanding
of assets
• Adequate technical resources in place
• Expand production base to spread production across a larger
number of assets
7. Misalignment of joint venture partners causing impact on
• Cost/schedule overruns
work programmes and cash flow
• Poor performance of assets
• HSE performance
value
• Delay in oil from development projects Negative impact on asset
• Joint venture partners having different views on drilling and work
programme
• Financial capability of joint venture partners
• Active participation in joint venture process
• Manage own technical work and asset understanding
• Financial capability assessment on current and potential joint
venture parties
Causes
Mitigation
• Sub-optimal capital allocation
• Activities run by asset operators causing safety or environmental
issues
• High grading opportunities based on clear financial metrics such
as NPV, IRR and payback
• Seek to maximise influence on operators of our producing assets
• Maintain a balanced portfolio across both oil and gas and
producing, development and exploration assets
• Active and regular dialogue with Shareholders
• Present in countries in challenging regulatory and political
environments
• Transacting with counterparties with sub-optimal reputational
and compliance record
• Usage of in country and international professional advisers
• Ensure adequate due diligence prior to on-boarding
counterparties including external compliance reports
• Annual training in anti-bribery and corruption
• Geopolitical issues
• Operations in challenging regulatory and political environments
• Sudden changes to fiscal regimes
• Government reform, political instability, civil unrest
• Maintain positive relationships with governments and key
stakeholders.
• Ongoing monitoring of the political and regulatory environments
in which we operate.
37
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices S172 Statement
In accordance with section 172(1) of the
Companies Act 2006, The Directors of the
Company have a statutory duty to promote
the success of the Company.
Stakeholder
How management/Directors engaged
Employees
• United remains a relatively small
company in terms of its full-time staff of
10 employees (excluding non-executive
directors) in Dublin and a Country Manager
supported by a small team in Cairo.
Why we engage
• We recognise that employees are a valued
and key part of our business.
• We are dependent on employees’
performance.
• We have a legal and ethical responsibility to
their well-being.
• They bring a diverse perspective, and broad
range of experience and expertise to the
identification of opportunities and ways of
working and essential to the delivery of our
strategic objectives.
• We engage with our employees in a variety
of ways to ensure that they are well
informed, motivated to execute our strategy
such that we can deliver on the long-term
goals of the business.
Shareholders, and financing partners
• Our shareholders include both high net
worth individuals and retail investors who
are principally based in the UK. Our top 10
shareholders account for approx. 60% of
our shareholder base.
• The Board has maintained its relationship
with BP throughout 2020 and regards BP as
a highly valued stakeholder.
Why we engage
• Our strategic and operational decision-
making is influenced by our investors’
views.
• We are dependent on access to funding.
• We are accountable to our shareholders.
• We believe that maintaining a regular and
transparent dialogue with our shareholders
and lenders is essential to earn and retain
their confidence. In line with the QCA
Corporate Governance Code, the Board
must manage shareholders’ expectations
and should try to understand the purpose
behind their voting decisions.
• The lenders are an important source of
funding for the Group’s operations.
Given the Company’s relatively small size,
communication is very fluid, and exchange
of information is very easy. There is no
requirement for “town hall” meetings at
this stage of the Company’s cycle. We
have an open, collaborative, and inclusive
management structure and engage very
regularly with our employees. Formal and
informal meetings take place in the form of:
• Regular staff meetings and team meetings;
• Face to face meetings; and
• Team building events.
These were either in person or virtual as
COVID-19 restrictions allowed.
• Our comprehensive investor relations
programme is designed to answer investor
queries and provide public disclosure on
results and other material developments
within the business as well as ensuring that
shareholders’ views are communicated to
the Board and considered in the Company’s
decision making.
• Our investor relations programme includes
regular updates via RNS’s, webcasts, calls,
meetings, investor roadshows, social media
and our Annual General Meeting as well
as participation in investor and industry
conferences.
In line with COVID-19 restrictions as
appropriate, the Company held several
physical and virtual investor roadshows /
meetings during the year with investors in
addition.
•
• Regular contact is maintained with our
lenders through a combination of physical
and virtual meetings.
Issues considered/key topics of
engagement
• Strategy
• HR Policies
• Remuneration and benefits
• Anti-bribery and Corruption
• Company News
• Ways of working
• Lessons learned from projects
•
• Collaboration across teams and that the
Internal communication
Company:
• Maintains a healthy, safe, and secure
working environment;
• Treats all employees in a fair and
transparent manner;
• Provides business appropriate training and
career development opportunities;
• Retains its culture of respect, integrity,
•
honesty, and transparency;
Is a successful company which our
employees are proud to be part of;
• All aware of aligned with our strategy; and
• Provides opportunities for employees to
share ideas for business improvements
with senior management.
Investment Returns
• Strategy
• Operational and Financial Performance
•
• Risk Management and Funding
• Corporate governance
• Board composition / remuneration and that
the Company:
• Delivers long-term share price
performance and adopts a strategy,
culture and business model designed to
enable this;
• Maintains appropriate operational,
financial and sustainability reporting
procedures; and
• Actively engages with lenders regarding
servicing existing debt facilities.
38
Outcomes of engagement and examples of such engagements
COVID-19 considerations
• The Company’s initiatives supported, informed, and motivated our
• The main impact was the reduction in travel and the lack of face time
employees through a difficult year. They helped the business to
across the business. Our office staff worked from home. Our Country
continue to function with negligible disruption during 2021 despite the
Manager is based in Egypt and was able to undertake regular visits to
continued COVID-19 pandemic.
our business partners required.
• Enhanced communication of our strategic priorities and performance.
• We ensured our office-based workers had what they needed to work
•
In person team events were held to strengthen cross-functional
collaboration (where government regulations allowed).
• During the pandemic restrictions, including the requirement to work
from home, the directors have hosted a daily call with employees.
• When restrictions were eased by the government, all United employees,
including the Board, came together for a corporate day for the
discussion of business matters. This was the first time in two years all
the team had been together.
• Hybrid work is a new working model with office staff having the option
to work from home and the office as they feel comfortable.
efficiently from home. When restrictions extended into 2021, business
travel was restricted and COVID-19 safe office was provided to those
unable to work from home, in line with government guidelines. Once
restrictions were lifted, staff were given the option to return to work if
they felt comfortable and air purifiers were provided in the office and
deep cleaning implemented.
•
In the operations in Egypt the Joint Operating Company ('JOC') had
stringent health and safety measure in place to mitigate the risk of
infection.
• Read more in our Corporate Responsibility Report page 44.
• Shareholders and lenders were keen to participate in regular
• Communication and transparency of our COVID-19 strategic
communication with the Company, with both physical and virtual
response: capital and portfolio management and reassurance on
meetings and investor roadshows well attended.
business continuity.
• 2021 was a very active year for the Company seeing over 40 RNS
• The main impact of COVID-19 was Annual General Meeting in June
Announcements covering all aspects of the business in a very
2021 were held virtually for the second time in compliance with
transparent manner. These included announcements on governance,
the UK’s COVID-19 regulations. Shareholders were able to submit
technical, financial, strategic and portfolio management matters. All
questions in advance, all of which were answered during the
shareholders are invited to participate in shareholder calls hosted by the
meetings by management. In general, there was a greater proportion
executive directors.
of shareholder and lender interaction through virtual meetings and
• Our annual investor programme, which during 2021(1) was managed in
calls than face-to-face meetings during the year.
person and using virtual technologies, and included:
• Over 50 Investor interactions with the executive team;
• Over 40 one-to-one meetings with current and new shareholders
including group meetings;
• Over 425 contacts met;
• Four webcasts for analysts and shareholders to take part in; and
• Numerous virtual conferences and interviews on retail platforms.
• Appointment of a new Joint Broker- Tennyson.
United Oil & Gas PLC The duty under S172(1) is applied in addition to the other duties of a director. Each Director must discharge these duties in accordance with
the duty of care, skill and diligence both objectively and to a subjective standard. The Board at United, as individuals and collectively consider
that they have acted in a way that would most likely promote the success of the Company, to deliver the goals and objectives.
The Board of Directors of United recognises the importance of building and sustaining relationships with all of its stakeholders,
considering the long-term consequences of our decisions, and the need to foster a good culture and good business conduct.
The Board of Directors have identified the following stakeholder groups as being important to our success and we set out below the
methods by which we engage with them.
How management/Directors engaged
Issues considered/key topics of
Outcomes of engagement and examples of such engagements
COVID-19 considerations
• The Company’s initiatives supported, informed, and motivated our
employees through a difficult year. They helped the business to
continue to function with negligible disruption during 2021 despite the
continued COVID-19 pandemic.
• Enhanced communication of our strategic priorities and performance.
•
In person team events were held to strengthen cross-functional
collaboration (where government regulations allowed).
• During the pandemic restrictions, including the requirement to work
from home, the directors have hosted a daily call with employees.
• When restrictions were eased by the government, all United employees,
including the Board, came together for a corporate day for the
discussion of business matters. This was the first time in two years all
the team had been together.
•
• Hybrid work is a new working model with office staff having the option
to work from home and the office as they feel comfortable.
• The main impact was the reduction in travel and the lack of face time
across the business. Our office staff worked from home. Our Country
Manager is based in Egypt and was able to undertake regular visits to
our business partners required.
• We ensured our office-based workers had what they needed to work
efficiently from home. When restrictions extended into 2021, business
travel was restricted and COVID-19 safe office was provided to those
unable to work from home, in line with government guidelines. Once
restrictions were lifted, staff were given the option to return to work if
they felt comfortable and air purifiers were provided in the office and
deep cleaning implemented.
In the operations in Egypt the Joint Operating Company ('JOC') had
stringent health and safety measure in place to mitigate the risk of
infection.
• Read more in our Corporate Responsibility Report page 44.
Shareholders, and financing partners
• Our comprehensive investor relations
• Strategy
• Shareholders and lenders were keen to participate in regular
• Communication and transparency of our COVID-19 strategic
communication with the Company, with both physical and virtual
meetings and investor roadshows well attended.
response: capital and portfolio management and reassurance on
business continuity.
• The main impact of COVID-19 was Annual General Meeting in June
2021 were held virtually for the second time in compliance with
the UK’s COVID-19 regulations. Shareholders were able to submit
questions in advance, all of which were answered during the
meetings by management. In general, there was a greater proportion
of shareholder and lender interaction through virtual meetings and
calls than face-to-face meetings during the year.
• 2021 was a very active year for the Company seeing over 40 RNS
Announcements covering all aspects of the business in a very
transparent manner. These included announcements on governance,
technical, financial, strategic and portfolio management matters. All
shareholders are invited to participate in shareholder calls hosted by the
executive directors.
• Our annual investor programme, which during 2021(1) was managed in
person and using virtual technologies, and included:
• Over 50 Investor interactions with the executive team;
• Over 40 one-to-one meetings with current and new shareholders
including group meetings;
• Over 425 contacts met;
• Four webcasts for analysts and shareholders to take part in; and
• Numerous virtual conferences and interviews on retail platforms.
• Appointment of a new Joint Broker- Tennyson.
(1) Data collection from August 2021 onwards
39
Stakeholder
Employees
• United remains a relatively small
company in terms of its full-time staff of
10 employees (excluding non-executive
directors) in Dublin and a Country Manager
supported by a small team in Cairo.
Why we engage
• We recognise that employees are a valued
and key part of our business.
• We are dependent on employees’
• We have a legal and ethical responsibility to
performance.
their well-being.
• They bring a diverse perspective, and broad
range of experience and expertise to the
identification of opportunities and ways of
working and essential to the delivery of our
strategic objectives.
• We engage with our employees in a variety
of ways to ensure that they are well
informed, motivated to execute our strategy
such that we can deliver on the long-term
goals of the business.
• Our shareholders include both high net
worth individuals and retail investors who
are principally based in the UK. Our top 10
shareholders account for approx. 60% of
our shareholder base.
• The Board has maintained its relationship
with BP throughout 2020 and regards BP as
a highly valued stakeholder.
Why we engage
• Our strategic and operational decision-
making is influenced by our investors’
views.
• We are dependent on access to funding.
• We are accountable to our shareholders.
• We believe that maintaining a regular and
transparent dialogue with our shareholders
and lenders is essential to earn and retain
their confidence. In line with the QCA
Corporate Governance Code, the Board
must manage shareholders’ expectations
and should try to understand the purpose
behind their voting decisions.
• The lenders are an important source of
funding for the Group’s operations.
Given the Company’s relatively small size,
communication is very fluid, and exchange
of information is very easy. There is no
requirement for “town hall” meetings at
this stage of the Company’s cycle. We
have an open, collaborative, and inclusive
management structure and engage very
regularly with our employees. Formal and
• Face to face meetings; and
• Team building events.
These were either in person or virtual as
COVID-19 restrictions allowed.
informal meetings take place in the form of:
•
Internal communication
• Regular staff meetings and team meetings;
• Collaboration across teams and that the
engagement
• Strategy
• HR Policies
• Remuneration and benefits
• Anti-bribery and Corruption
• Company News
• Ways of working
• Lessons learned from projects
Company:
• Maintains a healthy, safe, and secure
working environment;
• Treats all employees in a fair and
transparent manner;
• Provides business appropriate training and
career development opportunities;
• Retains its culture of respect, integrity,
honesty, and transparency;
•
Is a successful company which our
employees are proud to be part of;
• All aware of aligned with our strategy; and
• Provides opportunities for employees to
share ideas for business improvements
with senior management.
• Operational and Financial Performance
•
Investment Returns
• Risk Management and Funding
• Corporate governance
• Board composition / remuneration and that
the Company:
• Delivers long-term share price
performance and adopts a strategy,
culture and business model designed to
enable this;
• Maintains appropriate operational,
financial and sustainability reporting
procedures; and
• Actively engages with lenders regarding
servicing existing debt facilities.
programme is designed to answer investor
queries and provide public disclosure on
results and other material developments
within the business as well as ensuring that
shareholders’ views are communicated to
the Board and considered in the Company’s
decision making.
• Our investor relations programme includes
regular updates via RNS’s, webcasts, calls,
meetings, investor roadshows, social media
and our Annual General Meeting as well
as participation in investor and industry
conferences.
•
In line with COVID-19 restrictions as
appropriate, the Company held several
physical and virtual investor roadshows /
meetings during the year with investors in
addition.
• Regular contact is maintained with our
lenders through a combination of physical
and virtual meetings.
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices S172 Statement
continued
Stakeholder
How management/Directors engaged
•
Local Communities
• Our host countries are currently Egypt where
we have non-operating assets, Jamaica
and the UK CNS (which we divested out of)
where we have exploration licences. In Egypt
the operator (KEE) work closely with the
local communities in our areas of business.
In Jamaica we have licences offshore. We
are in the first exploration stage and work
comprises of geological and geophysical
studies.
Why we engage
• Engagement is key to maintaining our social
license to operate. United is committed to
being a positive presence in the regions
where we do business.
• Our corporate responsibility ethos is
that our projects should benefit all of our
stakeholders and particularly our host
countries and the local communities.
• Acting in a responsible way towards our
stakeholders is seen as critical to the
ongoing effectiveness of our business. Local
communities provide a diverse perspective
leading to new understanding of situations
and the mitigation of tensions.
• We have an ethical responsibility to minimise
impact on livelihoods and the environments
in which we operate – and where we are a
non-operator, United will use its relationships
and influence as Joint Venture partner and
its role in the Joint Operating Company to
achieve these aims.
Governments and Regulatory Agencies
•
In Egypt, United has good relations with the
Egyptian General Petroleum Corporation
(EGPC) and the Ministry of Petroleum and
Mineral Resources and in Jamaica the
Ministry for Science, Energy and Technology
(MSET).
Why we engage
• Maintain collaborative partnerships with
government agencies that generates value
for both parties.
• We are responsible to them for compliance
with local and/or international laws.
• Their permissions are required for us to
access acreage and operate.
•
In Egypt where we are a non-operator,
United uses its relationships and influence
as Joint Venture partner and its role in the
Joint Operating Company to monitor the
operator’s performance and adherence to
Health, Safety, and Environmental policies
and procedures.
• KEE have been operating in Egypt for over
a decade. They have a constructive and
positive approach to working with local
communities, seeking to maintain good
relationships with them.
• Our Country Manager in Egypt and Senior
Management have visit and engage with the
operators regularly.
• We take a constructive and positive
approach to working with national and
local authorities, as well as regulators in
both countries, seeking to maintain good
relationships with them all.
• We contribute to government and local
authorities in the countries in which we have
assets in the form of royalties, taxes and
fees every year.
• The Board meets with the Egyptian
General Petroleum Corporation (EGPC)
and the Ministry of Petroleum and Mineral
Resources (Ministry) each time an executive
director visits Egypt. The Country Manager
maintains an ongoing dialogue, including
face to face meetings with both EGPC and
the Ministry. Since taking on operatorship
of the Walton Morant licence in Jamaica,
travel restrictions have prevented directors
from visiting Jamaica, but instead, monthly
videoconferences have taken place with the
Ministry for Science, Energy and Technology.
40
Issues considered/key topics of
engagement
• Corporate Responsibility
• Environmental Management
• Access to employment and business
opportunities
• Protection of resources and livelihoods
• Community development and social
investment and that the Company:
• Delivers local and national economic
benefits;
• Safeguards the environment; and
• Acts as a responsible neighbour and good
corporate citizen.
Outcomes of engagement and examples of such engagements
COVID-19 considerations
• The engagement process further strengthened the existing
• We continued with our social investment programs as they were
relationships between the Joint Venture partners and the operator and
relating to education and training and capacity building. They were
the local communities in Egypt.
maintained despite restrictions and governmental lockdowns.
• Community investment focus around supporting industry capacity to
build industry specific skills.
• Gross annual contribution, as part of the Joint Operating agreement,
into a training fund for capacity building in Egypt and for Training and
Education in Jamaica.
• Sponsorship of the Capacity Building Feature, as part of the 4th
Upstream Technical Convention in Egypt.
• Sponsorship of the Al Amal mentorship programme for university
students to help build skills to find jobs with international oil
companies.
• Read more in our Corporate Responsibility Report page 44.
• Reviewing feedback and commentary from government and regulatory
• Observed host government regulations in respect to the COVID-19
bodies regarding performance expectation.
pandemic restriction.
• Maintained good, productive and collaborative working relationship
with the various government agencies we interact with in Egypt and
Jamaica.
• The CEO and COO of United have made several in person trips to Egypt
as restrictions have eased to meet with our stakeholders.
• Since taking on operatorship of the Walton Morant licence in Jamaica,
travel restrictions have prevented directors from visiting Jamaica, but
instead, monthly videoconferences have taken place.
• Attended the British Egyptian Business Association (BEBA) the Ministry
for Science, Energy and Technology conference.
• Legal Matters
• Asset Management
• Social Initiatives
• Revenue Collection
• Legal Compliance
• Major accident prevention
•
Investment and economic growth and it is
important that United:
•
Interacts in an appropriately open
and transparent manner with these
stakeholders;
• Has in place the policies and procedures to
ensure internationally recognised practices
are followed by our people and that local
laws are complied with;
• Operates in a healthy, safe, and secure
manner;
• Contributes towards national and local
economic development; and
• Secures required approvals and licence
renewals from regulatory bodies to
maintain our regulatory license to operate.
United Oil & Gas PLC • Our host countries are currently Egypt where
we have non-operating assets, Jamaica
and the UK CNS (which we divested out of)
where we have exploration licences. In Egypt
the operator (KEE) work closely with the
local communities in our areas of business.
•
In Jamaica we have licences offshore. We
are in the first exploration stage and work
comprises of geological and geophysical
studies.
Why we engage
• Engagement is key to maintaining our social
license to operate. United is committed to
being a positive presence in the regions
where we do business.
• Our corporate responsibility ethos is
that our projects should benefit all of our
stakeholders and particularly our host
countries and the local communities.
• Acting in a responsible way towards our
stakeholders is seen as critical to the
ongoing effectiveness of our business. Local
communities provide a diverse perspective
leading to new understanding of situations
and the mitigation of tensions.
• We have an ethical responsibility to minimise
impact on livelihoods and the environments
in which we operate – and where we are a
non-operator, United will use its relationships
and influence as Joint Venture partner and
its role in the Joint Operating Company to
achieve these aims.
(MSET).
Why we engage
• Maintain collaborative partnerships with
government agencies that generates value
for both parties.
• We are responsible to them for compliance
with local and/or international laws.
• Their permissions are required for us to
access acreage and operate.
Stakeholder
How management/Directors engaged
Issues considered/key topics of
Outcomes of engagement and examples of such engagements
COVID-19 considerations
Local Communities
•
In Egypt where we are a non-operator,
• Corporate Responsibility
• The engagement process further strengthened the existing
• We continued with our social investment programs as they were
relationships between the Joint Venture partners and the operator and
the local communities in Egypt.
relating to education and training and capacity building. They were
maintained despite restrictions and governmental lockdowns.
• Community investment focus around supporting industry capacity to
build industry specific skills.
• Gross annual contribution, as part of the Joint Operating agreement,
into a training fund for capacity building in Egypt and for Training and
Education in Jamaica.
• Sponsorship of the Capacity Building Feature, as part of the 4th
Upstream Technical Convention in Egypt.
• Sponsorship of the Al Amal mentorship programme for university
students to help build skills to find jobs with international oil
companies.
• Read more in our Corporate Responsibility Report page 44.
United uses its relationships and influence
as Joint Venture partner and its role in the
Joint Operating Company to monitor the
operator’s performance and adherence to
Health, Safety, and Environmental policies
and procedures.
• KEE have been operating in Egypt for over
a decade. They have a constructive and
positive approach to working with local
communities, seeking to maintain good
relationships with them.
• Our Country Manager in Egypt and Senior
Management have visit and engage with the
operators regularly.
engagement
• Environmental Management
• Access to employment and business
opportunities
• Protection of resources and livelihoods
• Community development and social
investment and that the Company:
• Delivers local and national economic
benefits;
• Safeguards the environment; and
• Acts as a responsible neighbour and good
corporate citizen.
Governments and Regulatory Agencies
• We take a constructive and positive
•
In Egypt, United has good relations with the
Egyptian General Petroleum Corporation
(EGPC) and the Ministry of Petroleum and
Mineral Resources and in Jamaica the
approach to working with national and
local authorities, as well as regulators in
both countries, seeking to maintain good
relationships with them all.
Ministry for Science, Energy and Technology
• We contribute to government and local
• Legal Matters
• Asset Management
• Social Initiatives
• Revenue Collection
• Legal Compliance
authorities in the countries in which we have
assets in the form of royalties, taxes and
fees every year.
• The Board meets with the Egyptian
General Petroleum Corporation (EGPC)
and the Ministry of Petroleum and Mineral
Resources (Ministry) each time an executive
director visits Egypt. The Country Manager
maintains an ongoing dialogue, including
face to face meetings with both EGPC and
the Ministry. Since taking on operatorship
of the Walton Morant licence in Jamaica,
travel restrictions have prevented directors
from visiting Jamaica, but instead, monthly
videoconferences have taken place with the
Ministry for Science, Energy and Technology.
• Major accident prevention
•
Investment and economic growth and it is
important that United:
•
Interacts in an appropriately open
and transparent manner with these
stakeholders;
• Has in place the policies and procedures to
ensure internationally recognised practices
are followed by our people and that local
laws are complied with;
• Operates in a healthy, safe, and secure
manner;
• Contributes towards national and local
economic development; and
• Secures required approvals and licence
renewals from regulatory bodies to
maintain our regulatory license to operate.
• Reviewing feedback and commentary from government and regulatory
• Observed host government regulations in respect to the COVID-19
bodies regarding performance expectation.
pandemic restriction.
• Maintained good, productive and collaborative working relationship
with the various government agencies we interact with in Egypt and
Jamaica.
• The CEO and COO of United have made several in person trips to Egypt
as restrictions have eased to meet with our stakeholders.
• Since taking on operatorship of the Walton Morant licence in Jamaica,
travel restrictions have prevented directors from visiting Jamaica, but
instead, monthly videoconferences have taken place.
• Attended the British Egyptian Business Association (BEBA) the Ministry
for Science, Energy and Technology conference.
41
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices S172 Statement
continued
Stakeholder
How management/Directors engaged
Issues considered/key topics of
engagement
Outcomes of engagement and examples of such engagements
COVID-19 considerations
• Ongoing close collaboration with JV partners to successfully deliver
• We have monitored how non-operating partners have conducted drilling
objectives.
campaigns during the pandemic, ensuring that best practice has been
followed.
• Our senior management engages in regular meetings with our
customers, suppliers and partners and we also participate in local
industry events. The purpose of this engagement is to establish and
maintain relationships with these important stakeholder groups.
• Operators of our assets host Technical Operating Committees and
Operating Finance Committees over the course of the year and the
Chief Operating Officer attends. There are routine interactions over the
course of the year on budget, technical and financial matters.
• Communication was virtual or in person as pandemic restriction
allowed.
Joint Venture Partners, Peers, Business
partners
• KEE are the operators in Egypt and the
Joint Operating Company consists of KEE,
Global connect ltd, and Dover investment. In
Jamaica we are the operators. In Italy we are
divesting our asset.
Why we engage
• Their performance directly impacts our
financial, operational and responsible
performance.
• We are reliant on viable partners in joint
ventures.
• We are commercially responsible to
contractors, suppliers and partners.
Suppliers
• United does not require a large network
of suppliers due to our position as a non-
operator for our producing and development
assets and with limited activities taking
place on our exploration and appraisal
assets suppliers support the Company
predominantly in support activities.
Interaction with suppliers is on an as
needs basis and all suppliers are dealt with
integrity and respect.
•
•
In 2021, engagement was carried out
using virtual technologies and face-to-
face meetings as COVID-19 restrictions
eased. Meetings with partners, peers and
contractors with board members and senior
executives in addition to regular joint venture
and operations, and technical planning
meetings.
• Maintaining membership of industry bodies
• Active management of key projects and
assets (including alignment of project
deliverables).
• Asset Planning
• Budget Planning
• Billings and cash calls
•
Interaction with government and regulatory
agencies
• Operations and health and safety
• Policies and standards
Industry reputation
•
•
Investment opportunities for growth
• Long-term relationships
• ESG matters
•
Interaction in 2021 was via:
• Video conferencing;
• Email;
• Telephone;
• Written communications; and
• Face to face meetings (where
government regulations allowed).
• Technical, Regulatory, Financial and Legal
Support
• Policies and standards
•
Industry reputation
• Long-term relationships
• ESG matters
Principal Decisions
For each of the principal decisions made by the Board, we provide a description of
• How stakeholders’ interests were considered and what influence this has on the decision
• The impact on risk management and the Company’s principal or emerging risks
• The consequences for the Company’s long-term success
• The impact of affected stakeholders and (where relevant the environment)
• Principal decisions considered by the Board
Principal decisions considered by the Board
Stakeholders considered
Engaging with and considering stakeholder interests
Effect of engagement with stakeholders on Board decisions and
• Holding the 2021 Annual General Meeting (AGM) as closed meetings.
• Shareholders (directly impacted by the decision because under normal
circumstances general meetings allow shareholders to attend in
person, to vote at the meeting on a poll and hold the Board to account
through Q&A and discussion).
• Colleagues (affected by safety concerns of not having a closed
meeting).
• Remote working, and ensuring protection of our colleagues.
• Employees (directly impacted by working remotely).
• The Board decided to hold the 2021 AGM as a closed meeting in order
• The decisions taken by the Board were designed to prioritise and
to protect the health and safety of our shareholders and colleagues.
protect the health and safety of our employees and our shareholders in
This was in accordance with guidance issued by the UK Government.
the face of the global public health risk.
impact of decisions on risk
Shareholders were strongly encouraged to exercise their votes by
submitting their proxy forms. Shareholder contribution to these
meetings is valued by the Board.
•
In order to protect our colleagues during the COVID-19 pandemic, the
• The Board was mindful of the impact of these decisions on our employees.
Board agreed that, where possible, employees should work remotely.
In this respect discussed the importance of mental health and encouraged
employees to ask for help. There was no business impact.
42
United Oil & Gas PLC Stakeholder
How management/Directors engaged
Issues considered/key topics of
Outcomes of engagement and examples of such engagements
COVID-19 considerations
Joint Venture Partners, Peers, Business
•
In 2021, engagement was carried out
using virtual technologies and face-to-
face meetings as COVID-19 restrictions
eased. Meetings with partners, peers and
contractors with board members and senior
executives in addition to regular joint venture
and operations, and technical planning
meetings.
• Maintaining membership of industry bodies
• Active management of key projects and
assets (including alignment of project
deliverables).
engagement
• Asset Planning
• Budget Planning
• Billings and cash calls
•
Interaction with government and regulatory
agencies
• Operations and health and safety
• Policies and standards
Industry reputation
•
•
Investment opportunities for growth
• Long-term relationships
• ESG matters
•
Interaction in 2021 was via:
• Video conferencing;
• Email;
• Telephone;
• Written communications; and
• Face to face meetings (where
government regulations allowed).
• Technical, Regulatory, Financial and Legal
Support
• Policies and standards
•
Industry reputation
• Long-term relationships
• ESG matters
partners
• KEE are the operators in Egypt and the
Joint Operating Company consists of KEE,
Global connect ltd, and Dover investment. In
Jamaica we are the operators. In Italy we are
divesting our asset.
Why we engage
• Their performance directly impacts our
financial, operational and responsible
• We are reliant on viable partners in joint
performance.
ventures.
• We are commercially responsible to
contractors, suppliers and partners.
Suppliers
• United does not require a large network
of suppliers due to our position as a non-
operator for our producing and development
assets and with limited activities taking
place on our exploration and appraisal
assets suppliers support the Company
predominantly in support activities.
•
Interaction with suppliers is on an as
needs basis and all suppliers are dealt with
integrity and respect.
• Ongoing close collaboration with JV partners to successfully deliver
objectives.
• Our senior management engages in regular meetings with our
customers, suppliers and partners and we also participate in local
industry events. The purpose of this engagement is to establish and
maintain relationships with these important stakeholder groups.
• Operators of our assets host Technical Operating Committees and
Operating Finance Committees over the course of the year and the
Chief Operating Officer attends. There are routine interactions over the
course of the year on budget, technical and financial matters.
• We have monitored how non-operating partners have conducted drilling
campaigns during the pandemic, ensuring that best practice has been
followed.
• Communication was virtual or in person as pandemic restriction
allowed.
Principal decisions considered by the Board
Stakeholders considered
Engaging with and considering stakeholder interests
• Holding the 2021 Annual General Meeting (AGM) as closed meetings.
• Shareholders (directly impacted by the decision because under normal
circumstances general meetings allow shareholders to attend in
person, to vote at the meeting on a poll and hold the Board to account
through Q&A and discussion).
• Colleagues (affected by safety concerns of not having a closed
meeting).
• Remote working, and ensuring protection of our colleagues.
• Employees (directly impacted by working remotely).
• The Board decided to hold the 2021 AGM as a closed meeting in order
to protect the health and safety of our shareholders and colleagues.
This was in accordance with guidance issued by the UK Government.
Shareholders were strongly encouraged to exercise their votes by
submitting their proxy forms. Shareholder contribution to these
meetings is valued by the Board.
•
In order to protect our colleagues during the COVID-19 pandemic, the
Board agreed that, where possible, employees should work remotely.
Effect of engagement with stakeholders on Board decisions and
impact of decisions on risk
• The decisions taken by the Board were designed to prioritise and
protect the health and safety of our employees and our shareholders in
the face of the global public health risk.
• The Board was mindful of the impact of these decisions on our employees.
In this respect discussed the importance of mental health and encouraged
employees to ask for help. There was no business impact.
43
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Corporate Responsibility Report
Our purpose is to responsibly
produce energy for our
communities and stakeholders
Doing business with integrity, ethically and safely is our priority. We also see reporting
transparently as important. United’s corporate responsibility is integrated within the business
and focuses on four key areas; Our People and Communities, Health and Safety, Environment,
and Values and Governance. To demonstrate our commitment to corporate responsibility
and how it is embedded within the organisation specific Environment, social and governance
('ESG') Key performance indicators ('KPI's') are linked to executive bonus payments. Corporate
KPI’s are based on Production reserves, Portfolio management, Financial corporate activity
and ESG. Further details can be found in the Remuneration Report (page 60).
Currently United is a non-operating partner in an oil and gas development and production
asset in Egypt, is operator of an exploration licence in Jamaica, and is a licence
administrator in the UK Central North Sea. As non-operator we use our relationships and
influence as a Joint Venture partner and our role in the Joint Operating Committee to
conduct business ethically.
United is committed to conducting our operations in a safe and responsible manner to deliver
long term growth, while complying with all applicable laws and regulations and limiting our
environmental impact. We contribute to host country development goals, and access to
affordable energy and supporting the local communities where we have business activities.
We manage our risks and seek to minimise any potential adverse impacts we may have.
The United Health, Safety and Environment Management System ('HSES MS') describes
the Group’s internal processes to manage risks and is based on a number of guidelines and
standards including the internationally recognised standard, ISO 14001.
The Chief Executive Officer is accountable to the Board for implementation of Health, and
Safety policy and the Environmental policy. United also has Human Rights guidelines. The
ESG Committee oversees the adequacy and effectiveness of our policies, standards and
management system for HSES.
44
United Oil & Gas PLC S
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2021 Annual Report and Financial Statements
45
Corporate Responsibility Report
continued
Our people and
communities
Our people
United remains a relatively small company in terms of its full-
time staff of 10 employees (excluding non-executive directors)
in Dublin and a Country Manager supported by a small team in
Cairo. United is committed to creating a safe work environment.
We are an equal opportunity employer promoting diversity
and treating all employees with respect and fairness. We have
technical, engineering, finance, commercial, investor relations and
administrative teams. Our employees have a diverse range of skill
sets, backgrounds and expertise which help deliver our strategy.
We have a culture conducive to working cross functionally and
encouragement of constructive debates. Our size of direct
employees facilitates daily direct dialogue amongst personnel and
Executive Directors.
Local capability building
We are committed to providing meaningful opportunities for
technical co-operation, training and capability building in host
countries. All our licence agreements include a high degree of
local content, which commits us to hire locally where possible and
provide training to develop new skills. In Egypt, as part of the Abu
Sennan Concession Agreement, the Company commits to a total
of $50,000 per annum for training and development of employees
to support developing future Egyptian expertise in the industry.
Similarly in the Jamaican Production Sharing Agreement United
commits to $100,000 per annum to a Training and Education Fund.
Community and social investment
Our social investments have been based on the needs of the
local communities where we have licences. We believe social
investment is part of being a good corporate citizen where
stakeholders can benefit from United’s business activities. Our
country manager in Egypt, identified that social investment
into projects focusing on Health and Education would be most
beneficial to the local community.
In 2021 United supported a number of social programmes in Egypt:
• United sponsored the Capacity Building Sponsor as part of the
industry capacity building, sponsorship of the Capacity Building
Feature at the Upstream Technical Convention in Egypt
• The Al Amal Mentoring Programme Sponsorship supporting 40
students to find jobs in international oil companies.
Case study
Al Amal (meaning hope) has been established for 14 years and consists of a yearly cohort of about 40 students, 30-40% of which
are women. It is a three-month full-time programme that helps university graduate students to compete for jobs with international
oil companies and help companies to find the right calibre candidates. The programme includes classroom studies such as
Communication skills, Emotional intelligence, IT, Business skills, teamwork and interview skills, project work, and field trips. In
2020, the Program was online for the first time, due to the pandemic but has returned to being face-to-face in 2021.
Students on the Al Amal mentorship programme.
46
United Oil & Gas PLC Health and
Safety
United is focused on ensuring that all employees have awareness,
information, and resources to be able to prioritise health and
safety and implement best practice to ensure that the chances of
any incidents are minimised.
Our Health and Safety policy commits us to: protecting the
health and safety of our employees; providing a workplace free of
discrimination where diversity is valued and to ensuring that we
consult and engage with our employees.
maintenance of a plant generator by a contractor's technician. The
trained team at the gas plant quickly controlled the fire using fire
extinguishers. The preliminary investigation revealed that the fire
caused by damaged insulation of the electric cable of the motor oil
charging pump. The fire resulted in damage to the generator and
minor injury on the hand of the contractor's technician. A detailed
investigation will be carried out to understand mitigation measure
and lessons learnt.
Safety indicators (reported by operator) 2021
Indicator
2021
Lost time injury frequency rate - LTIR
Total recordable incident frequency rate - TRIR
In response to the continuing pandemic, the Company has
taken steps throughout 2021 to ensure the safety of our staff
and the continued delivery of our business-critical activities.
These steps included:
Fatal accidents
Medical treatment cases
Restricted work injury
• Regular communication with in-country managers and
Number of motor vehicle incidents
01
02
0
0
0
3
1
0
0
employees
• Working from home options given to employees
• Directors have hosted a daily call with employees
• Regular updates to staff on hygiene measures and action in
case of symptoms
• Travel guidance / restriction if appropriate
• Adherence to all in-country governmental and operators’
guidelines on COVID-19 prevention
While United had no field activity in 2021 in which we were the
operator. We continued to work with our Joint Venture partners
and as part of the Joint Operating Company (JOC) in Egypt, with
the measures in place to minimise the risk of any COVID-19
outbreak and procedures were in place to ensure the impact of any
outbreak could be quickly contained. There was no disruption to
the operations in Egypt.
Our operators in Egypt maintained another year of zero Fatalities,
Medical Treatment Cases, Restricted Work Injuries and a zero
rate for Lost Time Injury frequency and Total recordable incidents
frequency. There were three motor vehicle incidents with no
harm to the drivers. All incidents were investigated, and lessons
learned as appropriate and actions to prevent recurrence were
implemented. There was also a fire incident, during the periodic
Property damage/fire
Near misses
Security breaches
EAS’s employees’ and contractors’ YTD man-
hours worked
1,511,005
1 Lost time injury frequency rate: Number of lost time injuries per million
man-hours for both employees and contractors.
2 Total Recordable Injury rate: Number of recordable injuries per million
man-hours for both employees and contractors
Human Rights
United subscribes to Principle One of the United Nations Global
Compact: Human Rights. This Principle sets out the UN Global
Compact’s overarching expectation of business on human rights,
namely, to respect and support human rights.
United’s Human Rights guidelines provides information and
ensures respect of Human Rights and we will follow any relevant
industry guides and international standards on Human Rights.
The appraisal of any potential human rights issues will be
included in the scope of work of all Environmental and Social
Impact Assessments (ESIA’s) commissioned by United for any
exploration or production project. We take steps to ensure our
agents, contractors and suppliers are aware of and comply with
our policies and seek to use our influence with our Joint Venture
partners to ensure the same.
47
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Corporate Responsibility Report
continued
Environment
United places great importance on limiting the impact our
activities have on the environment. The Company complies with
all of the environmental regulatory requirements in each country
that it is present in to ensure that all activity is undertaken safely.
While United had no field activity in 2021 in which we were the
operator, we continued to work with our partners in the Joint
operating company to use our relationship and influence to
promote best practice.
We are pleased to report that in 2021 the operator reported no spills.
Climate risk and global energy transition
Climate change is considered a principal risk to United and its
business over the medium and long term, and this is discussed in
more detail in the Risk Report on page 32.
Global energy transition is a factor that impacts many of the
Group’s principal risks including those associated with commodity
price, reserves, operations, and political, stakeholder and
reputational issues. United’s approach to climate change and the
energy transition is set out in our position statement. See page 9.
Greenhouse gas emissions ('GHG')
We are working with the operator in Egypt to identify, quantify
and categorise our emissions. We will consider emissions scope,
reporting boundary, and methodology. We intend to report on
these in next year’s annual report and work with the Joint Venture
partners to assess the data and identify opportunities for efficient
decarbonisation. We will be very transparent in our disclosures and
what can be achieved with regards to emissions.
Values/
Governance
United is committed to operating responsibly and ethically across
our business activities and does not tolerate bribery or corruption.
We expect our employees to adhere to high ethical standards.
The board believe that ESG and all it entails is integral to any
organisation. As such the directors bonus pay remuneration is
not only linked to corporate key performance indicators but also
ESG targets.
Business partners and influence
Relationships with business partners, host governments and
regulatory authorities where we have assets are critical for our
business. We are committed to doing business honestly and
ethically and to complying with all applicable laws and regulations.
Our ability to influence our business partners depends on our
degree of ownership and operatorship. Where we are the designated
operator (Jamaica) we fully apply the United HSES MS. Where we a
non-operating partner (Egypt and UK), we seek to influence, make
our views heard and ensure that minimum standards are met in
accordance with our policies, statements and codes.
Preventing corruption
United has non-operating assets in Egypt which is allocated a
score on Transparency International’s most recently published
Corruption Perception Index ('CPI'), featuring at number 117 out
of 180 countries in the 2021 CPI. In Jamaica and the UK where
United has exploration licences, Jamaica has a score of 70 and the
UK has a score of 11 on the same index.
United maintains internal control systems to ensure that our ethical
business standards for relationships with others are achieved. Bribery
is prohibited throughout the organisation, both by our employees
and by those performing work on our behalf. The Antibribery and
corruption policy is designed to prevent corruption and ensure
systems are in place to detect, remediate and learn from any potential
violations. This includes due diligence on new vendors, appropriate
training for all personnel, and ‘whistleblowing’ arrangements.
Payments to host governments
Revenues generated by a country’s natural resources plays an
important part in the growth and development of countries in
which we have business. Revenues to governments become
payable by United due to oil production entitlements, taxes,
royalties, licence fees and infrastructure improvements.
48
United Oil & Gas PLC
Objectives for 2022
We seek to continually improve and have identified objectives for 2022 in the four key areas in our corporate responsibly.
Key Area
Objectives for 2022
People and Communities
• Continue investment in, and engagement with employees and local communities
• Formalise a social investment policy
Health and Safety
• Continue to use our influence and relationships to promote best practice in Health and Safety as a
Environment
Joint Venture partner
• Maintain dialogue with employees regarding their preference for home/office working and wellbeing
• Continue to minimise the impact of our operations
• Work with the operator of the Egyptian assets to understand the GHG emissions at Abu Sennan
including - baseline of emissions data, methodology for recording, reporting boundaries, emissions
scope, water management and effluents and waste
Values and Governance
• Review our policies, statements and procedures commensurate to our size and that that reflect our
non-operating and operating licences
• Training for staff in relevant areas and polices
• Continue supplier due diligence
• All personnel to complete the annual Anti-Bribery & Corruption training
• Continue to review the Anti-Bribery & Corruption programme and update as required
Approval of the Strategic Report
This report was approved by the Board of Directors on 25 April 2022 and signed on its behalf by
Brian Larkin
Chief Executive Officer
49
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Corporate Governance Statement
Corporate Governance
Statement in respect of
United Oil & Gas PLC
The Board recognises the importance of sound corporate governance
in the management of the Company and in achieving its strategic goals.
Accordingly, the Company has adopted the Alliance Corporate Governance
Code (the “QCA Code') published in April 2018. The QCA code is tailored to
meet the needs of small and mid-size quoted firms and the Board believe
that this code provides the most appropriate framework for a company
of our size and stage of development. The Board will annually assess its
compliance with the QCA code and will consider as part of that review,
whether the QCA code continues to remain the most appropriate code for
the Company to adopt.
50
United Oil & Gas PLC
Chair’s Corporate Governance Statement
As Chair of the Board of Directors United Oil & Gas PLC my role is to lead the Board, ensuring sound high standards of corporate governance,
establishing a consistent and sustainable corporate culture of respect, integrity, honesty, and transparency. We believe that strong corporate
governance underpins our business to the benefit of all our stakeholders.
We are focussed on all aspects of ESG and integrating it within the business. Where we are non-operator, we will use our relationships and
influence to shape the ESG agenda. The focus on the ‘S’- social has been at the forefront as the global pandemic has swept across the
globe. The Board are committed to ensuring the health and safety of all who work with us and are in the communities in which we work.
Deliver
growth
Principle 1
Establish a strategy and business model which promotes long-term value for shareholders
The Board has concluded that the highest medium and long-term value can be delivered to its shareholders by the adoption of a strategy
to create value by actively managing our existing assets whilst growing our business through additional high-margin opportunities.
The Company’s interests currently consist of a multi-stage portfolio of low- cost producing assets with significant development and
exploration upside in Egypt, exploration and appraisal assets in the UK and an exploration asset in Jamaica.
Principle 2
Seek to understand and meet shareholder needs and expectations
The Company communicates with shareholders primarily via regular announcements of operational and corporate updates and semi-
annual release of audited financial statements. The investor section of the Company’s website (www.uogplc.com/investors/) is updated
regularly and includes regulatory news announcements (press releases), annual and interim reports, corporate presentations, and a list of
major shareholders. Shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings, in presentations
from the Company and on shareholder calls which are hosted a number of times a year.
The Company, through its public relations firms, attendance at shareholder events, website, conference calls, social media and its investor.relations@
uogplc.com email address, seeks to provide multiple communication lines through which private shareholders can engage with the Company.
The Company shall include, when relevant, in its Annual Report, any matters of note arising from the Board Committees.
Principle 3
Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board recognises that the long-term success of the Company is reliant upon maintaining effective working relationships across a
wide range of stakeholder groups. These include the Company’s host governments and regulatory authorities, employees and contractors,
joint venture partners, suppliers, shareholders and financing partners. Oversight of stakeholder engagement and the Company’s social
responsibilities is provided by the Environmental, Social and Governance ('ESG') Committee. The Board values feedback from all stakeholders
and has systems in place to ensure that there is oversight, accountability and contact with its key resources and relationships.
Principle 4
Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Company maintains a principal risks and mitigations register that is reviewed by the Audit and Risk Committee on an annual basis. Risks
are categorised as Strategic, Financial, Operational and Reputational and an explanation is given on how these risks are mitigated to enable
the Company to achieve its strategic objectives. In addition, the management team meet quarterly to review the Risks and risk register.
51
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices
Corporate Governance Statement
continued
Maintain a dynamic
management framework
Principle 5
Maintain the Board as a well-functioning, balanced team led by the Chair
The Board comprises: an independent non-executive Chair, Chief Executive Officer, a Chief Operations Officer, a Chief Financial Officer and
two non-executive directors who are considered by the Board to be independent. Biographies of the Board appear both on the Company’s
website and in the Annual Report.
Executive and non-executive directors are subject to re-election at the Company’s Annual General Meeting at intervals of no more than
three years although in practice all directors put themselves up for re-election annually. The service agreements and letters of appointment
of all Directors are available for inspection at the Company’s registered office during normal business hours.
The Board expects to meet at least six times per annum. It has established an Audit and Risk Committee, a Remuneration Committee,
an Environmental, Social and Governance Committee and an AIM Rules Compliance Committee. Full details of the number of Board
and Committee meetings and the attendance record of each director are set out in the Annual Report. The terms of reference for each
Committee are set out on the Company’s website www.uogplc.com. The Board has agreed that appointments to the Board at this stage
would be made by the Board as a whole and so has not created a Nominations Committee.
Principle 6
Ensure that between them the directors have the necessary up to date experience, skills and capabilities.
The Company believes that, at its current stage of development as an independent upstream oil and gas company, the balance of skills
on the Board as a whole, reflects a sufficiently broad range of technical, operational, commercial, legal, financial and risk management
experience, together with an in-depth knowledge of the sector and experience of public markets, that are necessary to ensure the Company
is equipped to deliver its strategy. The composition of the Board is kept under review to ensure that the necessary breadth and depth
of skills are available to support the ongoing development of the Company. The directors have access to the Company’s Nomad, legal
advisors, tax advisors and auditors and are able to seek advice from other professional advisors as required.
Full Biographies of the Board are available on the Company’s website www.uogplc.com and on page 56.
Principle 7
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
Internal evaluation of the Board, the Committees and individual Directors is undertaken on an annual basis by way of individual discussions
between the Chair and each director to determine the effectiveness and performance of the Board. A Board evaluation was conducted in
2021 and an overview is provided in the Annual Report.
The results and recommendations from the Board evaluation also identify the key corporate and personal targets relevant to each Director.
Progress against previous targets shall also be assessed where relevant.
52
United Oil & Gas PLC
Principle 8
Promote a corporate culture that is based on ethical values and behaviours
The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that
this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all
aspects of the Company as a whole and the way that employees behave. The corporate culture places a strong emphasis on conducting
business ethically, transparently and with clear lines of responsibility. The corporate governance arrangements that the Board has adopted
are designed to ensure that the Company delivers long term value to its shareholders and that shareholders have the opportunity to
express their views and expectations for the Company in a manner that encourages open dialogue with the Board.
The Company maintains an open and respectful dialogue with employees, partners and other stakeholders acknowledging that sound
ethical values and behaviours are crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places
great import on this aspect of corporate life and seeks to ensure that this flows through all that the Company does. The Directors consider
that at present the Company has an open culture facilitating comprehensive dialogue and feedback thus enabling positive and constructive
challenge.
The Company has adopted, with effect from the date on which its shares were admitted to AIM, a code for Directors’ and employees’
dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of
the Market Abuse Regulation.
Principle 9
Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
Ultimate accountability for all aspects of the Company’s activities rests with the Board, the respective responsibilities of the non-executive
Chair and Chief Executive Officer arising as a consequence of delegation by the Board. The non-executive Chair is responsible for the
effectiveness of the Board together with the responsibility to oversee the company’s corporate governance practices. The Board has also
established appropriate Committees as detailed below to oversee the effectiveness of its operations and governance. Terms of reference
for each Committee are available on the Company’s website at www.uogplc.com.
Audit and Risk Committee
The Audit and Risk Committee comprises Tom Hickey (Chair) and Iman Hill. This Committee has primary responsibility for monitoring
the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported on and for
reviewing reports from the Company’s auditors relating to the Group’s accounting and internal controls. The Committee is also responsible
for making recommendations to the Board on the appointment of auditors, the audit fee and for ensuring that the financial performance of
the Group is properly monitored and reported. The Committee will meet no less than three times a year.
Remuneration Committee
The Remuneration Committee comprises Graham Martin (Chair), Tom Hickey and Iman Hill. This Committee is responsible for ensuring
that executive remuneration is appropriate for this stage of the Company’s growth. It has established a Remuneration Policy which
outlines the principles on which executive remuneration will be structured, including an appropriately benchmarked base salary with
bonus and share award opportunities which reflect the performance of the Company and take account of the interests and experience of
shareholders. The Remuneration Policy also seeks to ensure that all employees have an opportunity to share in the Company’s success.
The Remuneration Policy is reviewed annually by the Committee. The Committee will meet no less than three times a year.
53
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Corporate Governance Statement
continued
AIM Rules Compliance Committee
The AIM Rules compliance Committee comprises Graham Martin (Chair), Tom Hickey and Brian Larkin and its prime responsibility is to
ensure the Company has sufficient procedures in place to ensure ongoing compliance with the AIM Rules. The Committee will meet at
least once a year.
Environmental, Social and Governance ('ESG') Committee
The ESG Committee comprises Iman Hill (Chair), Graham Martin, David Quirke and Jonathan Leather. Its prime responsibility is to
ensure sufficient oversight in the following areas of key importance to the Company: the environment, health and safety, corporate social
responsibility, sustainability, reputation, diversity, equality and inclusion, and community issues. The Committee will meet no less than
three times a year.
Nominations Committee
The Board has agreed that appointments to the Board will be made by the Board as a whole and so has not created a Nominations
Committee.
Meeting Attendance
Director’s attendance at meetings during each director’s respective term of office in 2021:
Director
Brian Larkin
Jonathan Leather
David Quirke
Graham Martin
Iman Hill
Tom Hickey
Board
Audit and Risk
Committee
Remuneration
Committee
ESG
Committee
11
11
11
11
11
11
-
-
21
-
2
2
-
-
-
4
4
4
-
4
4
4
4
-
1 The executive directors attended a number of meetings of Committees of which they were not members during the course of the year at the invitation of
the Committee Chair.
The AIM Rules Compliance committee met once during the year.
The Board generally meets monthly. In addition to the scheduled monthly meetings the Board also regularly held additional update calls
throughout the year to closely monitor progress on key matters. If any director was unable to attend, full comments on papers were
received from that director in advance of the meeting.
As a result of the requirements of the UK Government with regard to social distancing, and in order to protect the health and safety of our
shareholders and employees, the Board decided that the AGM in 2021 year would be convened as a closed meeting.
54
United Oil & Gas PLC Principle 10
Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other
relevant stakeholders.
The Board recognises that a healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable
all interested parties to come to informed decisions about the company. In particular, appropriate communication and reporting structures
should exist between the board and all constituent parts of its shareholder base. This will assist the communication of shareholders’ views
to the board; and the shareholders’ understanding of the unique circumstances and constraints faced by the company. The Corporate
Governance section of the Annual Report includes disclosure of Board Committees, their composition and where relevant, any work
undertaken during the year.
The company’s website includes all historic Annual Reports, results announcement, results presentations and other governance-related
material, including notices of all AGMs over the last six years.
To date, none of the resolutions proposed at United’s AGMs have resulted in a material proportion of votes (e.g. 20% of independent votes)
having been cast against them, but were this to happen the Company would announce this in a timely basis, including an explanation of
what actions it intended to take to understand the reasons behind such a vote result and, where appropriate, any action it had taken, or
would take, as a result of the vote.
Board Evaluation
The Board considers that regular evaluation of the Board, its committees and each of the directors is essential to the proper governance of the
Company and for its success. An internal evaluation was carried out in late 2021/early 2022 by the Chair of the Board of Directors in the form
of individual discussions between the Chair and each director. The Chair then provided feedback to the directors at the next board meeting.
Each discussion focussed on key agenda items circulated in advance by the Chair such as: the appropriateness of our current strategy; our
culture and values; the adequacy of internal controls and risk management; the constitution and effectiveness of the Board Committees
and board administration generally; and relationships with our major shareholders and other key stakeholders.
Each discussion was open, wide ranging and very constructive and covered any issues of concern or improvement any director wished to
raise. The collective view of the directors was that our corporate strategy remained appropriate, in particular its flexibility in such volatile
markets and uncertain economic times; that our culture and values were well aligned and reflected also in our staff; that the current size
of the Board and structure of the Committees remained suitable for this stage in the Company’s evolution and that the non-executive
directors had complementary experience and diverse skill sets to enable appropriate support and challenge to the executive directors.
There were no issues or concerns raised with our internal controls and risk management, and despite the travel and communication
constraints of the COVID-19 restrictions in place in 2021 it was felt that relations with our key stakeholders were maintained to a high level.
A number of areas where improvement could be made to our structure, practices and procedures were suggested and these will be a
focus of my and the Board’s attention in 2022. These included the continued diversification and experience of our management and
staff as opportunities arise to recruit; the return to in person board meetings as soon as possible, while maintaining the cost and time
effectiveness of video conferencing where appropriate; ensuring more interaction by our directors with our stakeholders; and keeping our
policies, procedures, and headcount “fit for purpose” and aligned with the evolution of our assets and opportunities.
55
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Board of Directors
Experienced Board
Brian Larkin
Chief Executive Officer
Jonathan Leather
Chief Operating Officer
David Quirke
Chief Financial Officer
M
M
M
Brian is the founding director of United Oil
and Gas PLC.
Brian is a Qualified Accountant and has
an MBA from Dublin City University.
Brian has extensive oil and gas industry
experience having worked for both Tullow
Oil plc and Providence Resources plc. At
Tullow Oil, Brian held positions in both
finance and commercial, and worked on
a variety of production, development and
exploration projects in South America
and Asia and carried out numerous
investment case recommendations.
At Providence, Brian worked in senior
finance and commercial positions. During
his time with Providence, Brian worked
on a wide portfolio of assets in regions
including the Gulf of Mexico, offshore
Ireland, onshore United Kingdom, and
offshore Nigeria.
Jonathan has over 20 years experience
in the oil industry and holds a Geology
degree from Oxford University, a PhD in
Sedimentology from Trinity College, Dublin,
and an MBA from Warwick University.
Jonathan worked for Tullow Oil plc from
2007 to 2015, where he held a number of
senior positions, including membership
of the Global Exploration Leadership
Team. Jonathan also managed Tullow’s
Subsurface Technology Group – a team
Jonathan established and built up to
provide specialist technical input across
the company in both exploration and
development. As part of this, Jonathan
worked on global assets and opportunities
ranging from onshore producing fields to
deepwater frontier exploration.
Prior to Tullow Oil, Jonathan worked
for Shell UK Ltd. During his time there,
Jonathan was involved in a number of
exploration and development projects, and
worked on North Sea, European, Middle
Eastern and Malaysian assets.
David has 18 years of treasury and
corporate finance experience in the
upstream oil and gas sector. David
established and led the Tullow Oil plc
Group Treasury function for a fifteen-year
period from 2003 to 2017, supporting
a period of transformational growth.
David has extensive experience of the
key exploration & production ('E&P') debt
and equity instruments such as Reserves
Based Lending Facilities, Acquisition
Facilities, Corporate Bonds, Trade Finance
Facilities and Equity Transactions. More
recently, David acted as a Treasury and
Financial Consultant advising Assala
Energy on their corporate finance and
treasury following the acquisition of
Shell’s onshore assets in Gabon. David
has also supported a number of small
E&P companies in managing their capital
structure and developing financial
strategies. David is a qualified chartered
management accountant. David holds
a BA in Law and Accounting from the
University of Limerick.
56
United Oil & Gas PLC Graham Martin
Non-Executive Chairman
Iman Hill
Non-Executive Director
Tom Hickey
Non-Executive Director
C
M
C
C M
M
M M C
Graham is an experienced senior natural
resources executive and brings a wealth
of international expertise. From 1997 to
2016 he served as an Executive Director of
Tullow Oil plc, an oil and gas exploration,
development and production company
listed in London, Dublin and in Ghana. Prior
to Tullow, Graham was a partner at the US
energy law firm Vinson & Elkins LLP, having
started his legal career in Scotland. He is
currently also a Non-Executive Director of
Kenmare Resources plc, one of the leading
global producers of titanium minerals and
zircon listed in London and Dublin.
He holds a degree in Law and Economics
from the University of Edinburgh.
AIM Rules Committee
ESG Committee
Remuneration Committee
Audit Committee
Chair
Member
C
M
Iman Hill is currently Executive Director
of the International Association of Oil &
Gas Producers. She also serves as non-
executive Independent Board Director of Oil
Spill Response Ltd and DHT Holding Inc.
Iman is a Petroleum Engineer with 30 years’
experience in the oil and gas industry with
extensive global expertise in the technical
and commercial aspects of the petroleum
business, in particular field development,
capital projects and production operations.
Iman’s experience has been gained in the
Middle East, North and West Africa, South
America, the Far East, and the North Sea in
a number of diverse settings from onshore
to ultra-deep water with companies that
include BP, Shell, BG Group and Dana Gas,
where as well as her role as Technical
Director, GM UAE and President Egypt,
she also ran the one of the Egyptian join
ventures as Managing Director and Board
member of The Egyptian Bahraini Gas
Derivatives Company.
Tom is currently CEO of Boru Energy
Limited, the West African focussed private
oil and gas company, which is supported
by The Carlyle Group. Tom is known across
the oil and gas industry and beyond as a
significant contributor to the success of
Tullow Oil plc in his role as CFO from 2000
to 2008. During this time he was central
to the successful conclusion of major
acquisitions and exploration discoveries
which helped shape that company into a
leading Independent oil and gas exploration
and production company.
He developed and implemented the
financial strategy which saw Tullow grow
from a micro-cap company to a FTSE 100
business valued at $15bn. In addition to
his work with Boru and Tullow, Tom has
served on the Boards of a number of oil
and gas businesses, building experience in
finance and operations in projects across
the globe, including markets in which
United currently participate.
Tom is a Commerce graduate of University
College Dublin and a Fellow of the Irish
Institute of Chartered Accountants.
57
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Directors’ Report
The directors present their
report and the audited Financial
Statements of the Group for the
year ended 31 December 2021
Results and Dividends
The profit for the year, after taxation, amounted to $4,074,094
(2020: $852,661). The directors do not recommend payment of a
dividend (2020: $Nil).
Directors
The business of the Company is managed by the Directors who
may exercise all powers of the Company subject to the articles
of association of the Company and applicable law. Executive and
non-executive directors are subject to re-election at the Company’s
annual general meeting at intervals of no more than three years.
No member of the Board had a material interest in any contract
of significance with the Company or any of its subsidiaries at
any time during the year, except for the interests in shares and in
share option awards under their service agreements and letters of
appointment disclosed in the Directors’ Remuneration report.
The directors who served during the year were:
Director
Brian Larkin
Jonathan Leather
David Quirke
Date of Contract
25 July 2017
25 July 2017
24 June 2019
Graham Martin
15 February 2018
Iman Hill
Tom Hickey
7 September 2020
1 January 2021
Principal Activities
The principal activity of the Company and its subsidiary
undertakings (the Group) is the production, development and
exploration of oil and gas. The company’s current operations are
located in Egypt, Jamaica, United Kingdom and Italy.
Business Review and Future Developments
A review of the business and future developments of the
Group is presented the Strategic Report (including the Chair’s
Statement, Chief Executive Officer’s Review, Review of Operations
and Financial Review) all of which together with the Corporate
Governance Statement, are incorporated by reference into this
Directors’ Report.
Financial Instruments and Risk Management
An explanation of the Group’s financial risk management
objectives, policies and strategies and information about the use
of financial instruments by the Group is given in note 23 to the
financial statements.
Share Capital
Details of the shares in issue are set out in note 17 to the financial
statements. The Company currently has one class of shares in
issue, ordinary shares of £0.01, all of which are fully paid.
Events Since the Balance Sheet Date
The events since the balance sheet date are disclosed in note 30.
Directors' Interests
As at 31 December 2021, the beneficial interests of the Directors
and their connected persons in the ordinary share capital of the
Company were as follows:
Director
Number of
Ordinary Shares
% of Ordinary
Share Capital
Brian Larkin
16,877,335
Jonathan Leather
David Quirke
Graham Martin
Tom Hickey
8,269,118
1,172,316
4,089,730
3,461,532
2.62
1.28
0.18
0.63
0.54
None of the Directors who held office at the end of the
financial year had any disclosable interest in the shares of
other Group companies.
Rights to subscribe for shares in the Company that were
granted during the financial year are disclosed in the
Remuneration Report.
58
United Oil & Gas PLC Auditor
A resolution to reappoint UHY Hacker Young as auditor will be put
to the members at the Annual General Meeting.
himself or herself aware of any relevant audit information and to
establish the auditor is aware of that information.
Disclosure of Information to Auditors
The directors who were members of the Board at the time of
approving the Director’s Report are listed above. So far as each
person who was a director at the date of approving this report is
aware, there is no relevant audit information, being information
needed by the auditor in connection with preparing its report, of
which the auditor is unaware. Having made enquiries of fellow
directors and the Group’s auditor, each director has taken all steps
that he or she is obliged to take as a director in order to make
On behalf of the Board
Brian Larkin
Chief Executive Officer
25 April 2022
Directors' responsibilities statement
The directors are responsible for preparing the strategic report, the
directors’ report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors have elected
to prepare the group financial statements in accordance with UK
adopted International Financial Reporting Standards and applicable
law and the company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). Under company
law the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of
affairs of the company and the group and of the profit or loss of the
group for that period and otherwise comply with the Companies
Act 2006. In preparing these financial statements, the directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgments and accounting estimates that are reasonable
and prudent;
• state whether applicable UK adopted International Financial
Reporting Standards have been followed for the group financial
statements and FRS101 for the company financial statements,
subject to any material departures disclosed and explained in
the financial statements;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and the group and enable them to
ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
company and the group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
59
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Remuneration Committee Report
The Remuneration Committee is a
standing committee of the Board
comprising Graham Martin (Chair),
Iman Hill and Tom Hickey
The purpose of the Remuneration Committee (the “Committee') is to
assist the Board in discharging its oversight responsibilities relating to the
attraction, compensation, evaluation and retention of its executive directors
and senior management. The Committee aims to ensure that fair and
competitive compensation is awarded to the executives with appropriate
performance and share acquisition incentives.
The current Remuneration Policy of the company (adopted in 2020 and revised in early 2021) sets out the principles of remuneration for
the executive directors and can be summarised as follows:
• an appropriately benchmarked salary;
• a 10% pension contribution;
• an annual bonus opportunity of 100% of salary, based 50% on Key Performance Indicators ('KPI’s'), 25% on an absolute total
shareholder return ('TSR') metric and 25% on relative TSR against a peer group of companies;
•
the Committee has discretion to adjust the formulaic outcome of the bonus scorecard if considered appropriate taking into account all
relevant factors affecting the company and its performance in the year;
• where the bonus outcome exceeds 40% of salary, the excess shall be paid in shares until certain personal shareholding targets of each
executive is met, thereafter the excess over 50% shall be paid in shares;
•
the consideration of an annual award of share options provided that the aggregate of all outstanding employee share options does not
ordinarily exceed 10% of the company’s issued share capital in any rolling 10-year period; and
• setting appropriate minimum shareholding targets for each executive, recognising their different respective tenures with the company.
The Remuneration Policy also sets out the fees payable to the non-executive directors and confirms that non-executives are no longer
eligible for share awards of any type.
The Remuneration Policy is reviewed annually by the Committee, the last such review being in March 2022 when no changes were
recommended.
60
United Oil & Gas PLC Summary of the Work of the Committee in 2020 and Early 2021
•
reviewed the Remuneration Policy;
• monitored the 2021 executive KPI bonus scorecard on a quarterly basis and provided feedback to the executives;
• benchmarked executive salaries and recommended no further increases to salaries beyond those set in the 2020 Annual Report; and
• benchmarked and reviewed the fees payable to the Chair and the other non-executive directors, recommending no increases from those
set out in the 2020 Annual Report.
Operation of the Bonus Scheme in 2021
As per the Remuneration Policy, the executives’ bonus opportunity was based 50% on the TSR performance of the company and 50% on
Key Performance Indicators ('KPI's'). The KPI's set for 2021 related to: production and reserve targets; value-enhancing corporate activity;
portfolio management; certain financial metrics and ESG targets.
The TSR components of the bonus were not met but the Committee determined that certain of the production targets were met, as were some
portfolio management, financial and Environmental Social and Governance ('ESG') targets, resulting in an aggregate score of 16.25%.
However, the Committee then considered the share price performance over the year and all other factors affecting the company and its
assets and determined that no bonus should be payable to the executives in respect of 2021.
Executive Director Service Contracts
The executive directors’ service contracts, the respective dates of which are shown in the Director’s Report, were entered into at different
times and had slightly different terms, although not materially so. We took the opportunity earlier this year to standardise their contracts
and bring them up to date. We are now in the process of finalising the individual contracts and hope to have them signed in the coming
weeks. The notice period in each case is 6 months to be given by each of the executive and the company.
61
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Remuneration Committee Report
continued
Executive Directors’ Remuneration 2021
Salary
Pension
Benefits
Total 2021
Total 2020
Brian Larkin
US$
Jonathan Leather
US$
David Quirke
US$
294,975
29,498
7,600
332,072
409,828
235,980
23,598
10,816
270,394
368,600
235,980
23,598
6,881
266,459
358,539
The benefits received by the executive directors include private medical insurance, permanent health assurance, life assurance cover and a
subscription to a sports club.
All executive directors’ remuneration is converted from EUR to USD at an average exchange rate for 2021 of 1.18 (2020: 1.14).
Change in personnel
Following year end, it was announced that David Quirke had tendered his resignation and would be leaving United. The Board has begun
the process of recruiting his successor and David will remain in his role until a suitable candidate has been identified to ensure an
orderly transition.
Executive Directors’ Remuneration 2022
The salaries of the executive directors for 2022, remain the same as for 2021 as follows:
Salary
Brian Larkin
EUR
Jonathan Leather
EUR
David Quirke
EUR
250,000
200,000
200,000
2022 Bonus scheme
As per the Remuneration Policy, the executive directors are entitled to a 100% bonus opportunity in 2022, 50% of which is based on two TSR
metrics, and 50% against the following KPI's: Production and reserves (5%); Corporate activity (12.5%); Financial (5%); ESG (10%); Portfolio
management (7.5%) and Personal (10%). Details of performance against these metrics will be disclosed in the 2022 Annual Report.
Non-Executive Directors’ Remuneration 2021
Graham Martin
US$
54,964
54,964
51,533
Salary/fees
Total 2021
Total 2020
Iman Hill
US$
34,353
34,353
6,144
Tom Hickey
US$
Stewart Macdonald
US$
Alberto Cattaruza
US$
34,353
34,353
-
-
-
-
-
9,662
19,325
Non-executive directors are paid in GBP and the average exchange rates were 1.37 and 1.29 for 2021 and 2020 years respectively.
62
United Oil & Gas PLC Non-Executive Directors’ Remuneration 2022
The fees payable to the non-executive directors in 2022 remain the same as 2021, as follows:
Salary/fees
Graham Martin
£
40,000
Iman Hill
£
25,000
Tom Hickey
£
25,000
No non–executive director is entitled to an additional fee for chairing any Committee.
Share Option Awards
The following share option awards to directors were in place as at 31 December 2021:
Director
Brian Larkin
Jonathan Leather
David Quirke
Graham Martin
Iman Hill
Tom Hickey
Options
Option Price
Award Date
Vesting Date
Expiry Date
4,235,294
4,817,500
4,058,824
4,100,000
3,666,667
4,100,000
1,176,471
1,000,000
1,481,481
1,342,282
4.25p
4.00p
4.25p
4.00p
3.00p
4.00p
4.25p
4.00p
2.70p
2.98p
02-Aug-2018
01-Aug-2021
30-Jul-2028
17-Jun-2020
17-Jun-2023
16-Jun-2030
02-Aug-2018
01-Aug-2021
30-Jul-2028
17-Jun-2020
17-Jun-2023
16-Jun-2030
24-Jun-2019
23-Jun-2022
21-Jun-2029
17-Jun-2020
17-Jun-2023
16-Jun-2030
02-Aug-2018
01-Aug-2021
30-Jul-2028
17-Jun-2020
17-Jun-2023
16-Jun-2030
29-Sep-2020
29-Sep-2023
28-Sep-2030
5-Jan-2021
5-Jan-2024
4-Jan-2031
Share options have been awarded to current staff of the Company and the aggregate number of options awarded at 31 December 2021 is
49,604,414 which is 7.69% of the issued Share Capital of the Company.
Non-executive directors are no longer eligible for share options.
63
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Audit and Risk Committee Report
Dear Shareholders,
The Audit and Risk Committee’s primary responsibilities include the
integrity of the Group’s Financial Statements, the effectiveness of the
Group’s risk management and internal assurance processes and related
governance and compliance matters and provide oversight on behalf of
and to the Board in relation to the Group’s Financial Reporting, Internal
Controls and External Audit activities.
The Audit and Risk Committee is also responsible for overseeing the
relationship with the external auditor, including ongoing assessment of
their independence and objectivity. During the year, the Committee met
twice, and the members attendance record is set out in the Corporate
Governance section of the report.
64
United Oil & Gas PLC Composition of the committee
I served as Chair of the Audit and Risk Committee for the duration of the year having been appointed Chair in 2021. Serving with me on the
Committee during 2021 was fellow non-executive directors; Iman Hill. The members of the Committee have been chosen to provide the
wide range of financial and commercial experience needed to fulfil these duties.
At our request, the CFO along with senior members of the finance department attend each meeting. The external auditors attend when
appropriate. The Audit and Risk committee met two times in 2021 with meetings arranged around the key external reporting dates.
The first meeting focused on the 2020 year-end external audit process (reported in the 2020 Annual Report and Accounts). The second
meeting centred on the Group’s half year reporting. Subsequent to the year end, a meeting was held in April 2022 to conclude the 2021
audit and any significant issues.
Responsibilities
The key responsibilities of the Committee are as follows:
• monitor the integrity of the financial statements of the Company including its annual and half yearly reports and any other
announcements relating to its financial performance
•
review and report to the Board on significant financial reporting issues and judgements contained in the reports and announcements
having regard to matters communicated to it by the auditor
•
review and challenge the methods used to account for significant transactions
• keep under review the Company’s internal financial control systems
• consider and make recommendations to the Board, to be put to shareholders for approval at the annual general meeting, in relation to
the appointment, re-appointment and removal of the company’s external auditor
• oversee the relationship and terms of engagement with the external auditor including fees for audit and non-audit services
•
review the findings of the audit with the external auditor including a discussion on the major issues which arose during the audit, key
accounting judgements and the auditors view of their interactions with senior management.
The Audit and Risk Terms of Reference are available on our website, https://www.uogplc.com/theboard/
External Auditor
UHY Hacker Young were appointed in 2017 and no tender has been conducted since to date, in line with best practice (which is at least
once every ten years typically). The external audit fees for 2021 were US $70,000. There were no principal non-audit fees in 2021. Any non-
audit services are pre-approved by the Committee. The Committee has decided that the size and scale of the Group’s activities does not
justify an Internal Audit function.
Key judgments and Estimates in Financial Reporting
Key Judgements and
Estimates in Financial
Reporting
Audit and Risk
Committee Review
Outcomes
Impairment of exploration
and evaluation assets
Yes
Impairment of development
assets in the Group
Accounting and valuation
of assets held for sale
relating to UOG Italia Srl
Yes
Yes
The treatment of exploration and evaluation asset balances across the Group
at the year-end to be materially correct. An impairment provision of £454,534
was recognised in UOG PL090 Limited following the impairment of the Waddock
Cross licence (Note 10).
No issues were identified in relation to impairment of development assets at the
year end and continue to be held at Net Book Value in the Balance Sheet (Note 11).
The sale of UOG Italia Srl is materially accurate and has been accounted for in
line with the criteria of IFRS 5 and separated as non-current assets and liabilities
held for sale on the Balance Sheet (Note 13).
65
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Environmental, Social and Governance (ESG) Committee Report
We are committed
to being transparent
Composition of the committee
I served as Chair of the ESG Committee
for the duration of the year having been
appointed Chair in September 2020.
Serving with me on the Committee during
2020 was Graham Martin, Chair of the
Board of Directors, David Quirke, CFO and
Jon Leather, COO. At our request, the Head
of Investor relations and ESG attends each
meeting. The ESG Committee met four
times in 2021, once every quarter.
Responsibilities and activities during
the year
The terms of reference for the Committee
have been adopted with the key
responsibilities of the Committee being:
• have oversight of the ESG Strategy
• have oversight of the Company’s ESG
targets and key performance indicators
• have oversight of the Company’s ESG
budget, as well as major ad hoc pieces
of spending related to ESG
• have oversight of third-party partnerships
entered in relation to the ESG Strategy
• have oversight of how the ESG Strategy
is communicated internally and
externally
The ESG Committee Terms of Reference
are available on our website: https://
www.uogplc.com/wp-content/
uploads/2021/12/Enviromental-Social-
and-Governance-ESG-Committee-Terms-
of-Reference-Final.pdf
Dear Shareholders,
It is fundamentally important to the Board that the business
is run ethically, in a transparent manner and with a
deliberate focus on social investment into the communities
where we have business activities. The development of
an ESG scorecard that is linked to management reward
drives accountability and focus on moving forward with
activities such as emissions measurement and reduction
and the development of a structured corporate responsibility
performance indicators.
66
United Oil & Gas PLC Topics discussed on during 2021
• Detailed review of policies, standards and
procedures, including the Health, Safety,
and Environmental management system,
Health and Safety Policy, Environmental
Policy, and Human Rights guidelines
footprint of United as an operator, the
Board and management are fully aligned
on the need to also ensure that we are
working with the operator to understand
and explore ways to reduce the
environmental footprint of our operations.
• Detailed review of current Environmental
and Social investment projects and
proposed social investment projects in
Egypt, and Jamaica
• Review and discussion of progress of
ESG key performance indicators for
2021 and development of these for 2022
• Review of the social investment strategy
based on the needs of the communities
where we have business activities
• Discussion and review of the Companies
risks and discussions on the risk matrix
• Discussion of additional policies,
standards, or procedures required that
are commensurate with the size and
stage of the Company
• Discussion on working with the
operator to understand emissions data
collection and reporting
• Discussion on health and safety
metrics reported by the operator
During the year the Committee
focused on the following matters:
Environmental
United has outlined their stance on
climate change in our Climate Change
and Energy Transition position statement,
see page 9. Despite the current limited
This includes investigating ways to
reduce greenhouse gas emissions,
energy efficiency and the reduction and
management of waste. This applies
to operated and non-operated assets.
Where we are non-operator we will, seek
to influence the operators to understand
how emissions are measured, what
the measurements are, and what the
contributors are and any mitigations
measures that can be applied.
We are committed to being transparent
in what we report and what we can and
cannot achieve.
Social
The Company is committed to managing
its relationships with its workforce, the
communities it has business activities,
and host Governments in line with
the highest standards of corporate
governance. At its core this means full
compliance with the Health, Safety and
Environmental management system, the
implementation of workplace policies,
e.g., employee relations and engagement,
diversity, equality, inclusivity and non-
discrimination. In addition, United seeks
to ensure respect of human rights and
appropriate labour standards in the supply
chain. The company understands that
good integration with local communities
is fundamentally important to its ‘social
licence’ to operate.
The welfare of our stakeholders and in
particular our employees has been at the
forefront of our agenda throughout the
Pandemic. We supported our employees to
work from home. The Group’s production
operations in Egypt were not disrupted
by COVID-19 and the operator ensured
measures were in place to minimise the
risk of any outbreak occurring both in the
field and in the office.
Governance
The Group is committed to the ethical
conduct of the Group’s business including
its corporate governance framework and
is guided by the 10 principles set out in
the QCA code. We will promote a culture
based on ethical values and behaviours
with embedded risk management. Board
Committees have been established for
ESG, Audit and Risk, Remuneration and
AIM Rules Compliance.
The development of an ESG scorecard
that is linked to management reward
drives accountability and focus on moving
forward with activities such as emissions
measurement and reduction and the
development of a structured corporate
responsibility plan.
Further details can be found in our
Corporate Responsibly Report page 44.
ESG Key Performance Indicators
('KPI's')
The ESG KPI’s account for 20% of the
executive directors corporate KPI’s and flow
through to Executive Compensation. The
ESG KPI’s for 2022 have been assessed by
the ESG Committee and approved by the
Remuneration Committee in early 2022.
67
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Independent Auditor's Report to the Members of United Oil & Gas PLC
For the year-ended 31 December 2021
OPINION
We have audited the financial statements of United Oil & Gas Plc (the ‘Parent Company’) and its subsidiaries (the “Group')
for the year ended 31 December 2021 which comprise the Consolidated Income Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated Balance sheet, the Consolidated Statement of Changes in Equity, the Consolidated
Statement of Cash Flows and the notes to the consolidated financial statements, including significant accounting policies, the
Parent Company Balance sheet, the Parent Company Statement of Changes in Equity and the notes to the Parent Company
financial statements, including significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group’s financial statements is applicable law and
UK adopted International Financial Reporting Standards ('IFRSs'). The financial reporting framework that has been applied in the
preparation of the Parent Company’s financial statements is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31
December 2021 and of the Group’s profit for the year then ended;
•
the Group financial statements have been properly prepared in accordance with UK adopted IFRSs;
•
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Group and 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.
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CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the
preparation of the financial statement is appropriate. Our evaluation of the director’s assessment of the entity’s ability to continue
to adopt the going concern basis of accounting included:
Evaluation of management assessment
Management have prepared detailed consolidated cash flow forecasts incorporating all entities within the Group covering the
period to 31 December 2023. These are based on their expectation of future costs, including budgeted operating and capital
expenditure on all licence areas and expectations of future oil and gas production levels and commodity prices.
The key assumptions are considered to be the forecast production rates, commodity prices, disinvestment of UOG Italia Srl, and
capital expenditure in Egypt. The divestment of UOG Italia Srl was completed post year-end and hence this key assumption was
not considered further.
Management have considered the key assumptions to the forecasts and sensitivities have been applied to the forecasts to create
sensitised cases as follows:
• Case A – a scenario with a reduction in forecast production rates of 15% and a reduction in oil prices by 20%.
• Case B – a scenario with an increase in forecast capital expenditure in Egypt by 10%.
• Case C – a scenario with a reduction in forecast production rates of 15% and an increase in forecast capital expenditure in Egypt
by 10%.
• Case D – a scenario with significant aggregated downside, including a reduction in forecast production rates of 15%, a reduction in
oil prices by 20% and an increase in forecast capital expenditure in Egypt by 10%.
Our review included:
• Assessing the transparency, the completeness and accuracy of the matters covered in the going concern disclosure by
evaluating management's cash flow projections for the forecast period and the underlying assumptions;
• Reviewing the cash flow forecasts, the methodology behind these, challenging the assumptions, and ensuring they are
arithmetically correct;
• Obtaining post year-end management information and comparing these to budget to ensure budgeting is reasonable and
results are in line with expectations;
• Reviewing management’s sensitivity analysis on the cash flow forecasts provided to assess the number of factors that
it would take to occur in tandem before the Group was pushed into a negative cash position along with considering the
mitigating actions available to management in such circumstances; and
• Discussing with management plans for the Group going forward, ensuring these had been incorporated into the budgeting
and would not have an impact on the going concern status of the Group.
Key observations
The base case cash flow forecast demonstrates that the Group will have a cash flow surplus throughout the forecast period.
These incorporated all budgeted and committed capital expenditure and the current expected production rates on the Abu
Sennan concession, which is consistent with current production levels. The forecast uses the forward price of oil being in line
with the BP Brent Forward Curve.
In each of the cases, the cash reserves remained positive during the forecast period.
Despite the fact that cash reserves remained positive in each of the cases after running the sensitivities, management have
demonstrated that mitigating actions could also be taken to ensure that cash remains positive throughout the forecast period
if additional negative, such as delaying the timing for certain discretionary exploration activity. Further mitigating actions are
also possible in addition to delayed expenditure, such as divesting certain exploration projects and/or raising additional funding
through either debt or equity.
The likelihood of all these downside sensitivities taking place simultaneously and lasting for the entire forecast period is considered to
be remote and, in such circumstances, sufficient mitigating actions are considered to be available to continue as a going concern.
2021 Annual Report and Financial Statements
69
Independent Auditor's Report to the Members of United Oil & Gas PLC
For the year-ended 31 December 2021
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the entity’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant section of
this report.
OUR APPROACH TO THE AUDIT
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account an understanding of the structure of the Parent Company and the Group, their
activities, the accounting processes and controls, and the industry in which they operate. Our planned audit testing was directed
accordingly and was focused on areas where we assessed there to be the highest risk of material misstatement.
Our Group audit scope includes all of the group companies. At the Parent Company level, we also tested the consolidation procedures.
The audit team communicated regularly throughout the audit with the finance team in order to ensure we had a good knowledge of
the business of the Group. During the audit, we reassessed and re-evaluated audit risks and tailored our approach accordingly.
The audit testing included substantive testing on significant transactions, balances and disclosures, the extent of which was based
on various factors such as our overall assessment of the control environment, the effectiveness of controls and the management
of specific risk.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant findings, including any significant deficiencies in internal control that we identify during the audit.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, 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. This is not a complete list of all risks identified during our
audit. Going concern is a significant key audit matter and is described above. In arriving at our audit opinion above, the other key
audit matters were as follows:
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Key Audit Matters
How Our Scope Addressed These Matters
Revenue recognition in UOG Egypt Pty Limited.
Our audit work included, but was not restricted to:
Under IFRS 15 Revenue Recognition, revenue depicts
the transfer of goods or services to customers in an
amount that reflects the consideration to which the
entity expects to be entitled in exchange for those
goods or services. There is an inherent risk relating to
completeness and cut-off of revenue.
We therefore identified revenue recognition in UOG
Egypt Pty Limited as a key audit matter in the Group
financial statements, which was one of the most
significant assessed risks of material misstatement.
Impairment of exploration and evaluation assets in
the Group.
The Group has capitalised costs in respect of the
Group’s licence interests in accordance with IFRS 6
Exploration for and Evaluation of Mineral Resources.
The Directors need to assess the exploration assets
for indicators of impairment and, where they exist,
to undertake a full review to assess the need for an
impairment charge. The impairment reviews involve
significant judgements that could significantly impact
the results of the impairment review.
We therefore identified the impairment of exploration
and evaluation assets as a key audit matter in
the Group financial statements, which was one
of the most significant assessed risks of material
misstatement.
• Documenting our understanding of management’s process
for evaluating revenue recognition and assessing the design
effectiveness of related key controls.
• Assessing the appropriateness of the revenue recognition policies
applied by management in their assessment of the revenue
recognised for the year by comparing it to the Group’s accounting
policy and IFRS 15.
• Agreeing whether revenue has been recognised in accordance with
these policies.
• Testing the completeness of revenue by performing a proof-in-
total. In addition, the monthly production reports relating to the
current year were agreed to EGPC invoices issued in relation to the
Abu Sennan concession.
• Ensuring cut-off is accurate to confirm that all income relating to the
year ended 31 December 2021 has been accounted for.
Key observations:
As a result of the audit procedures we performed, we have concluded
that revenue recognition in UOG Egypt Pty Limited is materially accurate
and recognised on an appropriate basis.
No issues were identified with respect of revenue recognised in UOG
Egypt Pty Limited during the year.
Our audit work included, but was not restricted to:
• Obtaining and discussing each of the licences with management
and evaluating their assessment regarding potential indicators of
impairment.
• Reviewing the future plans of the projects in respect of funding,
viability and development to further assess whether there were any
indicators of impairment.
• Reviewing available information to assess whether the licences
remain in good standing.
The Audit Committee identified the impairment of exploration licence
as a significant issue in its report on page 65, where the Committee
has also described the actions that it has taken to address this issue.
Key observations:
As a result of the audit procedures we performed, we have concluded that
the treatment of exploration and evaluation asset balances across the
Group at the year-end to be materially correct.
An impairment provision of £454,534 was recognised in UOG PL090
Limited following the impairment of the Waddock Cross licence. No
further indicators of impairment were identified in respect of the
carrying values of exploration and evaluation assets at the year end.
2021 Annual Report and Financial Statements
71
Independent Auditor's Report to the Members of United Oil & Gas PLC
For the year-ended 31 December 2021
Key Audit Matters
How Our Scope Addressed These Matters
Impairment of development assets in the Group.
Our audit work included, but was not restricted to:
The Group has interests in development assets in
Egypt which require an annual impairment review
in accordance with International Accounting
Standard 36 Impairment of Assets ('IAS 36'). The
directors need to assess the development assets
for impairment and where appropriate, recognise
an impairment charge. This involves significant
judgements and assumptions such as the timing and
extent and probability of future cash flows.
We therefore identified the impairment of
development assets as a key audit matter in the
Group financial statements, which was one of
the most significant assessed risks of material
misstatement.
Impairment of investments and loans due from
subsidiary companies in United Oil & Gas Plc
Under IAS 36, companies are required to assess
whether there is any indication that an asset may
be impaired at each reporting date. Management
assessment involves significant judgements and
assumptions such as the timing and extent and
probability of future cash flow.
The Parent Company has investments in its
subsidiaries of £16.1m (2020: £16.1m) and loans due
from subsidiary companies of £6.7m (2020: £5.7m).
The investments and loans represent the primary
balances on the Parent Company balance sheet
and there is a risk they could be impaired and that
intragroup loans may not be recoverable.
We therefore identified the impairment of
investments in subsidiaries and loans due from
subsidiary companies as a key audit matter in the
Parent Company financial statements, which was one
of the most significant assessed risks of material
misstatement.
• Discussing the Abu Sennan concession with management and
evaluating their assessment of impairment in conjunction with the
Competent Person’s Report and IAS 36.
• Discussing the current activity in Egypt with management to understand
the current position and future plans for development.
• Reviewing mineral reserves at the year-end for evidence of
recoverability of the development assets.
• Reviewing forecast revenue to be generated by the concession during
its remaining lifecycle in the context of the concession’s remaining
reserves.
The Audit Committee identified impairment of development assets
(Property, Plant and Equipment) as a significant issue in its report on
page 65, where the Committee has also described the actions that it
has taken to address this issue.
Key observations:
As a result of the audit procedures we performed, we have concluded
that the treatment of development assets across the Group at the
year-end to be materially correct.
No issues were identified in relation to impairment of development
assets at the year end.
Our audit work included, but was not restricted to:
• Reviewing the investments balances for indicators of impairment
in accordance with IAS 36.
• Assessing the appropriateness of the methodology applied by
management in their assessment of the recoverable amount of
intragroup loans by comparing it to the Group’s accounting policy
and IAS 36.
• Assessing management‘s evaluation of the recoverable amounts
of loans to subsidiaries including review the impairment provisions
and net asset values of components that have intercompany debt.
• Checking that intragroup loans have been reconciled and
confirming that there are no material differences.
Key observations:
As a result of the audit procedures we performed, we have concluded
that the treatment of investments in and loans due from subsidiary
companies in the Parent Company at the year-end to be materially
correct.
The majority of the investment balances correlate with the exploration
assets held by each subsidiary and our impairment review was
therefore linked to our assessment of indicators of impairment on the
corresponding exploration licences and development assets (as above).
No further indications of impairment were identified in respect of the
carrying values of investments and intragroup loans at the year end.
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Key Audit Matters
How Our Scope Addressed These Matters
Valuation of the loan and embedded derivative in
United Oil & Gas Plc.
The Parent Company holds a loan from Britannic
Trading Limited. The loan has a derivative element
attached which falls under the scope of IFRS
9 Financial Instruments. There is a risk that
the associated embedded derivatives are not
appropriately valued.
We therefore identified valuation of the embedded
derivatives as a key audit matter in the Parent
Company and Group financial statements, which was
one of the most significant assessed risks of material
misstatement.
Accounting and valuation of assets held for sale
relating to UOG Italia Srl.
During the year, the Group announced the sale
of UOG Italia Srl for €2.16m, and the relevant
assets and liabilities are treated as held for sale in
accordance with IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations. IFRS 5 iterates
the requirement that assets and liabilities should
be measured at their fair values. The sale was not
completed at the year-end date, but subsequently
completed post year-end. This is a one-off material
transaction which raises the risk that the accounting
and valuation has not been treated correctly.
We therefore identified accounting and valuation of
assets held for sale relating to UOG Italia Srl as a key
audit matter in the Group financial statements, which
was one of the most significant assessed risks of
material misstatement.
Our audit work included, but was not restricted to:
• Reviewing the loan agreement and derivative documentation to
confirm the value and terms and conditions of the repayment
period.
• Reviewing the fair value calculations of the derivative to confirm
the accuracy of the calculations at the year-end date.
• Reviewing the post year-end refinancing and the effect on the
repayment terms.
Key observations:
As a result of the audit procedures we performed, we have concluded
that the treatment of the embedded derivative at the year-end to be
materially correct.
After considering management’s disclosures of the judgements
applied by them, we have concluded that the valuations of the
embedded derivatives are materially accurate and have been
accounted for in line with appropriate recognition criteria.
Our audit work included, but was not restricted to:
• Reviewing the signed sale and purchase agreement to confirm the
reasonableness of the accounting treatment in line with IFRS 5.
• Reviewing the held for sale balances to ensure they are recorded
appropriately at fair value.
• Confirming the sale has been completed post year-end and vouching
the completion statement and reception of funds.
• Performing a review of the consolidation entries, adjustments and
accounting estimates to ensure the assets held for sale had been
recognised and consolidated within the Group appropriately.
• Reviewed the disclosures in the financial statements to ensure
they are appropriate and compliant with IFRS 5.
The Audit Committee identified the fair value of the Italian disposal as
a significant issue in its report on page 65, where the Committee has
also described the actions that it has taken to address this issue.
Key observations:
As a result of the audit procedures we performed, we have concluded
that the treatment of the assets held for sale at the year-end to be
materially correct.
After considering management’s assessments, we have concluded
that the sale of UOG Italia Srl is materially accurate and has been
accounted for in line with the criteria of IFRS 5.
2021 Annual Report and Financial Statements
73
Independent Auditor's Report to the Members of United Oil & Gas PLC
For the year-ended 31 December 2021
OUR APPLICATION OF MATERIALITY
The scope and focus of our audit was influenced by our assessment and application of materiality. We apply the concept of
materiality both in planning and performing our audit, and in evaluating the effect of misstatements on our audit and on the
financial statements.
We define financial statement materiality as the magnitude by which misstatements, including omissions, could reasonably be
expected to influence the economic decisions taken on the basis of the financial statements by reasonable users.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole..
Materiality Measure
Group
Parent
Overall materiality
We determined materiality for the financial statements to be:
How we determine it
Rationale for benchmarks
applied
Performance materiality
Reporting threshold
$539,000 (2020: $393,000)
$351,000 (2020: $275,000)
Based on the main key performance
indicator, being 2% of net assets of the
Group.
Based on the same methodology as the
Group, being 2% of net assets of the Parent
Company.
We believe that net assets are the most appropriate benchmark due to the size and stage
of development of the Group and Parent Company. Although the Group is now generating
revenue, the exploration and extraction and production asset balances are still deemed to
be the key performance indicators for stakeholders of the Group as a whole.
On the basis of our risk assessment, together with our assessment of the Group’s and
Parent Company’s control environment, our judgement is that performance materiality for
the financial statements should be 75% of materiality being:
$404,250 (2020: $294,895)
$263,250 (2020: $206,250)
We agreed with the Audit Committee that we would report to them all misstatements over
5% of Group and Parent Company materiality identified during the audit as set out below, as
well as differences below that threshold that, in our view, warrant reporting on qualitative
grounds. We also report to the Audit Committee on disclosure matters that we identified
when assessing the overall presentation of the financial statements.
$26,950 (2020: $19,650)
$17,550 (2020: $13,750)
Specific threshold
We also determine a judgemental lower level of specific materiality for certain areas such
as directors’ remuneration and related party transactions.
$2,000 (2020: $2,000)
$2,000 (2020: $2,000)
74
United Oil & Gas PLC
OTHER INFORMATION
The other information comprises the information included in the annual report other than the financial statements and our
auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on
the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
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2021 Annual Report and Financial Statements
75
Independent Auditor's Report to the Members of United Oil & Gas PLC
For the year-ended 31 December 2021
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or Parent Company or to cease operations, or have no realistic
alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below:
Based on our understanding of the Group and the industry in which it operates, we identified that the principal risks of non-
compliance with laws and regulations related to the acts by the Group which were contrary to applicable laws and regulations
including fraud and we considered the extent to which non-compliance might have a material effect on the financial statements.
We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such
as the Companies Act 2006 and the Quoted Company Alliance Corporate Governance Code. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and
determined that the principal risks were related to misstated revenue and overstated exploration and development assets.
Audit procedures performed included: review of the financial statement disclosures to underlying supporting documentation,
review of correspondence with legal advisors, enquiries of management, and testing of journals to evaluate whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
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.
76
United Oil & Gas PLC
USE OF OUR REPORT
This report is made solely to the Parent Company’s members, as a body, in accordance with part 3 of Chapter 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Daniel Hutson (Senior Statutory Auditor)
For and on behalf of
UHY Hacker Young
Chartered Accountants and Statutory Auditor
UHY Hacker Young
4 Thomas More Square
London
E1W 1YW
25 April 2022
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2021 Annual Report and Financial Statements
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Consolidated Income Statement
For the year-ended 31 December 2021
Revenue
Other income
Cost of sales
Gross profit
Administrative expenses:
Other administrative expenses
Impairment of intangible assets
Impairment of divestment receivable
Exploration and New Venture write offs
Foreign exchange (losses) / gains
Gain on non-current assets held for sale
Operating profit
Finance income
Finance expense
Profit before taxation
Taxation
Profit for the financial year attributable to the Company’s equity shareholders
Earnings per share from continuing operations expressed in cents per share:
Basic
Diluted
Note
2
2
3
13
4
6
6
7
8
31 December
2021
$
31 December
2020
$
19,228,698
9,053,657
1,940,574
-
(8,911,815)
(6,505,011)
12,257,457
2,548,646
(1,763,362)
(1,589,529)
(624,546)
(394,686)
(377,934)
(356,850)
118,651
(37,161)
-
(307,557)
189,918
-
8,858,730
804,317
-
1,572,706
(2,922,754)
(1,580,842)
5,935,976
(1,861,882)
4,074,094
796,181
56,480
852,661
0.64
0.62
0.15
0.14
78
United Oil & Gas PLC Consolidated Statement of Comprehensive Income
For the year-ended 31 December 2021
Profit for the financial year
Foreign exchange (losses) / gains
Total comprehensive income for the financial year attributable to the
Company’s equity shareholders
31 December
2021
$
31 December
2020
$
4,074,094
852,661
(209,164)
(337,713)
3,864,930
514,948
79
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Consolidated Balance Sheet
For the year-ended 31 December 2021
Assets:
Non-current assets
Intangible assets
Property, plant and equipment
Non-current assets / assets in disposal groups held for sale
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Current liabilities:
Trade and other payables
Derivative financial instruments
Borrowings
Lease liabilities
Current tax payable
Non-current liabilities:
Borrowings
Derivative financial instruments
Lease liabilities
Liabilities associated with assets in disposal groups held for sale
Net assets
Equity and liabilities:
Capital and reserves
Share capital
Share premium
Share-based payment reserve
Merger reserve
Translation reserve
Retained earnings
Shareholders’ funds
31 December
2021
$
31 December
2020
$
Note
10
11
13
14
15
16
19
22
22
21
22
22
21
13
17
17
18
4,970,091
17,990,809
22,960,900
2,561,250
7,891,743
13,607,167
21,498,910
-
25,522,150
21,498,910
145,570
7,702,021
397,308
8,244,900
(5,422,734)
(1,346,044)
(2,422,212)
(83,368)
(57,246)
35,729
5,454,307
2,188,902
7,678,938
(2,996,115)
(992,681)
(2,133,655)
(94,050)
(135,388)
(9,331,604)
(6,351,889)
-
-
(24,494)
(24,494)
(116,048)
(2,422,146)
(647,376)
(96,787)
(3,166,309)
-
24,294,904
19,659,650
8,416,182
8,138,619
16,215,361
16,047,975
2,247,465
1,922,090
(2,697,357)
(2,697,357)
(558,104)
671,357
(348,940)
(3,402,737)
24,294,904
19,659,650
The financial statements were approved by the Board of Directors and authorised for their issue on 25 April 2022 and were signed on its behalf by:
Brian Larkin
Chief Executive Officer
United Oil & Gas PLC
80
Registered number: 09624969
United Oil & Gas PLC
Consolidated Statement of Changes in Equity
For the year-ended 31 December 2021
Share
capital
$
Share
premium
$
Share-
based
payments
reserve
$
Retained
earnings
$
Translation
reserve
$
Merger
reserve
$
Total
$
For the year ended
31 December 2021
Balance at 1 January 2021
8,138,619
16,047,975
1,922,090
(3,402,737)
(348,940)
(2,697,357)
19,659,650
Profit for the year
Foreign exchange difference
Total comprehensive income
-
-
-
-
-
-
Shares issued
277,563
167,386
-
-
-
-
Share-based payments
-
-
325,375
4,074,094
-
-
(209,164)
4,074,094
(209,164)
-
-
-
-
-
-
-
-
-
4,074,094
(209,164)
3,864,930
444,949
325,375
Balance at 31 December 2021
8,416,182
16,215,361
2,247,465
671,357
(558,104)
(2,697,357)
24,294,904
For the year ended
31 December 2020
Balance at 1 January 2020
4,564,787
9,912,988
1,591,808
(4,255,398)
(11,227)
(2,697,357)
9,105,601
Profit for the year
Foreign exchange difference
Total comprehensive income
-
-
-
-
-
-
Shares issued
3,573,832
6,640,081
-
-
-
-
Share issue expenses
Share-based payments
-
-
(505,094)
62,516
-
267,766
852,661
-
-
(337,713)
852,661
(337,713)
-
-
-
-
-
-
-
-
-
-
-
-
852,661
(337,713)
514,948
10,213,913
(442,578)
267,766
Balance at 31 December 2020
8,138,619
16,047,975
1,922,090
(3,402,737)
(348,940)
(2,697,357)
19,659,650
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2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Consolidated Statement of Cash Flows
For the year-ended 31 December 2021
Cash flow from operating activities
Profit for the financial year before tax
Share-based payments
Depreciation
Amortisation
Fair value loss / (gain) on derivatives
Impairment of intangible assets
Gain on non-current assets / disposal groups held for sale
Loss on disposal of intangible assets
(Gain) / loss on disposal of property, plant and equipment
Interest expense
Foreign exchange movements
Tax paid
Changes in working capital
(Increase) / decrease in inventory
(Increase) / decrease in trade and other receivables
Decrease in trade and other payables
Cash inflow from operating activities
Cash outflow from investing activities
Cash outflows on business combination
Cash acquired in business combination
Deposits received on disposal of non-current assets
Purchase of property, plant & equipment
Spend on exploration activities
Net cash used in investing activities
Cash flow from financing activities
Issue of ordinary shares net of expenses
Proceeds on issue of oil swap financing arrangement
Repayments on oil swap financing arrangement
Payments on oil price derivatives
Capital payments on lease
Interest paid on lease
31 December
2021
$
31 December
2020
$
5,935,976
325,375
4,107,685
3,985
1,527,250
624,546
(118,651)
-
(25,683)
796,181
267,766
2,628,990
3,862
(1,572,706)
37,161
-
31,307
42,318
1,395,504
1,580,842
356,850
(189,918)
(1,940,574)
-
12,192,263
3,625,803
(109,841)
64,433
(2,276,303)
2,530,065
(697,544)
(1,390,182)
9,108,575
4,830,119
-
-
160,404
(11,200,000)
46,543
-
(3,607,826)
(2,816,460)
(2,121,050)
(1,457,307)
(5,568,472)
(15,427,224)
444,949
-
5,835,834
7,760,288
(3,518,359)
(1,666,116)
(1,805,086)
(68,914)
(14,421)
(70,431)
(73,183)
(5,753)
Net cash (used in) / generated from financing activities
(4,961,831)
11,780,639
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Effects of exchange rate changes
Cash and cash equivalents at end of financial year
(1,421,728)
2,188,902
(369,866)
397,308
1,183,534
1,275,537
(270,169)
2,188,902
82
United Oil & Gas PLC Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
1. PRINCIPAL ACCOUNTING POLICIES
Company Information
United Oil & Gas PLC is a public limited company incorporated and domiciled in the United Kingdom.
Basis of Preparation
The financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements
of the Companies Act 2006 and with those parts of the Companies Act 2006 applicable to companies reporting under UK adopted IFRS.
IFRS is subject to amendment and interpretation by the IASB and the IFRS Interpretations Committee, and there is an on-going process of
review. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 31 December 2021.
The principal accounting policies set out below have been consistently applied to all periods presented.
Basis of Consolidation
The financial statements for the year ended 31 December 2021 incorporate the results of United Oil & Gas PLC ('the Company') and entities
controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from its activities.
All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
Going Concern
United regularly monitors its business activities, financial position, cash flows and liquidity through detailed forecasts. Scenarios and
sensitivities are also regularly presented to the Board, including changes in commodity prices and in production levels from the existing
assets, plus other factors which could affect the Group’s future performance and position. A base case forecast has been considered which
uses budgeted commitments and prevailing forward curve assumptions for oil prices. The key assumptions and related sensitivities include
a “Reasonable Worst Case” ('RWC') sensitivity where the Board has considered a scenario with significant aggregated downside, including a
reduction in forecast production rates of 15%, a reduction in oil prices by 20% and an increase in forecast capital expenditure in Egypt by 10%.
Both the base case and RWC take into consideration the Crown Milestone Settlement Agreement for $2.5m and the completion of the
Italian divestment for €2.2m in early 2022. The likelihood of all these downside sensitivities taking place simultaneously and lasting for the
entire forecast period is considered to be remote. Under such a RWC scenario, we have identified appropriate mitigating actions, including
the deferral of additional uncommitted capital expenditure, further divestment of the portfolio, restructuring of debt arrangements and
adjustment of the Group cost base, which would be available to us and have been demonstrated as effective strategies in previous periods
of low oil prices. Our business in Egypt remains robust given cash operating costs of less than $6/boe, flexible drilling contracts, downside
price protection on our hedged volumes and gas contracts that are fixed price in nature. There are limited capital commitments in the
other assets in our portfolio. The forecasts outlined above show that the Group will have sufficient financial headroom for the 12 months
from the date of approval of the 2021 Accounts. Based on this analysis, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to use the going concern basis
of accounting in preparing the annual Financial Statements.
Revenue
Revenue comprises invoiced sales of hydrocarbons to customers, excluding value added and similar taxes. Also disclosed within revenue
is tariff income recognised, excluding value added and similar taxes, for gas transportation facilities provided to third parties.
Revenue is recognised at a point in time as control passes to the customer, which is typically the point of delivery of hydrocarbons. The
Group does not have performance obligations subsequent to delivery.
83
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
Other Income – Tax Entitlement Volumes
Under the concession agreements in Egypt, income tax due on taxable profit is paid on the Group’s behalf by EGPC. To achieve this through
the agreements, the Group notionally receive a greater share of hydrocarbon production in excess of the Group’s entitlement interest share
of production equal to the amount required to cover the tax payable. The oil is produced and sold on the Group’s behalf and proceeds
remitted to the tax authorities. This income does not fall within the definition of revenue and is therefore shown as other income with an
equal and opposite tax charge recorded through current taxation.
Foreign Currency
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated at the rate of exchange ruling at the year-end date. All differences are taken to the Income Statement.
Assets and liabilities of subsidiaries that have a functional currency different from the presentation currency (US dollar), if any, are translated
at the closing rate at the date of each balance sheet presented. Income and expenses are translated at average exchange rates. All resulting
exchange differences are recognised in other comprehensive income (loss), if any.
Finance Income and Costs
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset or liability and allocates
the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
receipts or payments through the expected life of the financial asset or liability to the net carrying amount of the financial asset or liability.
Exploration and Evaluation Assets
The group accounts for oil and gas expenditure under the full cost method of accounting.
Costs (other than payments to acquire the legal right to explore) incurred prior to acquiring the rights to explore are charged directly to the
profit and loss account. All costs incurred after the rights to explore an area have been obtained, such as geological, geophysical, data costs
and other direct costs of exploration and appraisal are accumulated and capitalised as intangible exploration and evaluation ('E&E') assets.
E&E costs are not amortised prior to the conclusion of appraisal activities. At the completion of appraisal activities if technical feasibility is
demonstrated and commercial reserves are discovered, then following development sanction, the carrying value of the relevant E&E asset
will be reclassified as a development and production asset within tangible fixed assets.
If after completion of appraisal activities in an area, it is not possible to determine technical feasibility or commercial viability, then the
costs of such unsuccessful exploration and evaluation are impaired to the Income Statement. The costs associated with any wells which
are abandoned are fully amortised when the abandonment decision is taken.
Development and production assets are accumulated generally on a field by-field basis and represent the costs of developing the
commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in finding commercial
reserves which have been transferred from intangible E&E assets.
The net book values of development and production assets are depreciated generally on a field-by field basis using the unit of production
method based on the commercial proven and probable reserves. Assets are not depreciated until production commences.
Depreciation of Production Assets
Production assets are accumulated into cash generating units ('CGUs') and the net book values are depreciated on a prospective basis
using the unit-of-production method by reference to the ratio of production in the year and the related economic commercial reserves,
taking into account future development expenditures necessary to bring those reserves into production.
The gain or loss arising on disposal or scrapping of an asset is determined as the difference between the sales proceeds, net of selling
costs, and the carrying amount of the asset and is recognised in the income statement.
Each asset’s estimated useful life has been assessed with regard to both its own physical life limitations and the present assessment
of economically recoverable reserves of the oil and gas asset at which the item is located, and to possible future variations in those
assessments. Estimates of remaining useful lives are made on a regular basis for all oil and gas assets, machinery and equipment, with
annual reassessments for major items. Changes in estimates which affect unit production calculations are accounted for prospectively.
84
United Oil & Gas PLC Other Intangible Assets
Other intangible assets acquired separately from a business combination are capitalised at cost.
Intangible assets are amortised on a straight-line basis over their useful lives as follows:
Computer software 33%
The carrying value of intangible assets is assessed annually and any impairment is charged to the income statement.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less depreciation. Depreciation is provided on a straight-line basis at rates calculated
to write off the cost less the estimated residual value of each asset over its expected useful economic life. The residual value is the
estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition
expected at the end of its useful life.
The annual rate of depreciation for each class of depreciable asset is:
Computer equipment 33%
The carrying value of property plant and equipment is assessed annually and any impairment is charged to the income statement.
Non-current assets held for sale and disposal groups
Non-current assets and disposal groups are classified as held for sale when:
• They are available for immediate sale
• Management is committed to a plan to sell
•
It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn
• An active programme to locate a buyer has been initiated
• The asset or disposal group is being marketed at a reasonable price in relation to its fair value, and
• A sale is expected to complete within 12 months from the date of classification.
Non-current assets and disposal groups classified as held for sale are measured at the lower of:
• Their carrying amount immediately prior to being classified as held for sale in accordance with the Group's accounting policy; and
• Fair value less costs of disposal.
Following their classification as held for sale, non-current assets (including those in a disposal group) are not depreciated.
The results of operations disposed during the year are included in the consolidated statement of comprehensive income up to the date
of disposal.
A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of
operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the
criteria to be classified as held for sale.
Discontinued operations are presented in the consolidated statement of comprehensive income as a single line which comprises the post-
tax profit or loss of the discontinued operation along with the post-tax gain or loss recognised on the re-measurement to fair value less
costs to sell or on disposal of the assets or disposal groups constituting discontinued operations.
85
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
Impairment of Non-financial Assets
At each balance sheet date, the Directors review the carrying amounts of the Group’s tangible and intangible assets, other than goodwill, to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the
asset or cash-generating unit is reduced to its recoverable amount. If the recoverable amount of a cash-generating unit is less than its carrying
amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets
of the unit pro rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset or cash-generating unit in prior periods. A reversal of an impairment loss is
recognised in the Income Statement immediately.
Financial Instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset
and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in
accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets are classified into the following categories:
• amortised cost;
•
fair value through profit or loss ('FVTPL'); and
•
fair value through other comprehensive income ('FVOCI').
In the periods presented the Group does not have any financial assets categorised as FVOCI or FVTPL.
The classification is determined by both:
•
the entity’s business model for managing the financial asset; and
•
the contractual cash flow characteristics of the financial asset.
86
United Oil & Gas PLC Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions:
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
•
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group’s cash and cash equivalents, trade and other receivables fall into this category of financial instruments.
Impairment of Financial Assets
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model to be applied. The expected credit loss
model requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition of the financial assets.
IFRS 9 requires the Group to recognise a loss allowance for expected credit losses on trade receivables.
In particular, IFRS 9 requires the Group to measure the loss allowance for a financial instrument at an amount equal to the lifetime
expected credit losses ('ECL') if the credit risk on that financial instrument has increased significantly since initial recognition, or if the
financial instrument is a purchased or originated credit-impaired financial asset. However, if the credit risk on a financial instrument has
not increased significantly since initial recognition, the Group is required to measure the loss allowance for that financial instrument at an
amount equal to 12 months ECL.
Classification and measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables and embedded derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial
liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within
finance costs or fair value gains/(losses) on derivative financial instruments.
Embedded derivative financial instruments
A borrowing arrangement structured as a prepaid commodity swap with monthly repayments over 30 months has embedded in it a
derivative that is indexed to the price of the commodity. This is considered to be a separable embedded derivative of a loan instrument.
At the date of issue, the fair value of the embedded derivative is estimated by considering the derivative as a series of forward contracts
with modelling of the fixed and floating legs to determine a repayment schedule and derive a net present value for the forward contract
embedded derivative.
This amount is recognised separately as a financial liability or financial asset and measured at fair value through the income statement.
The residual amount of the loan is then recorded as a liability on an amortised cost basis using the effective interest method until
extinguished upon conversion or at the instrument’s maturity date.
87
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments with
original maturities of three months or less.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease arrangements in which it is the lessee.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.
The lease liability is presented as a separate line in the statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective
interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease term has changed in which case the lease liability is remeasured by discounting the revised lease payments using a revised
discount rate.
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in
which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the
lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at
the effective date of the modification.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, prepayments made on the lease at or before
the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset.
The depreciation starts at the commencement date of the lease.
Taxation
Current taxation for each taxable entity in the Group is based on the local taxable income at the local statutory tax rate enacted or
substantively enacted at the balance sheet date and includes adjustments to tax payable or recoverable in respect of previous periods.
Deferred Taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements. However, if the deferred tax arises from the 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 or loss,
it is not accounted for. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance
sheet date and are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised.
88
United Oil & Gas PLC Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Income Statement, except where they relate
to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable
entity or different taxable entities where there is an intention to settle the balances on a net basis.
Share-based Payments
Where share-based payments (warrants and options) have been granted, IFRS 2 has been applied whereby the fair value of the share-
based payments is measured at the grant date and spread over the period during which they vest. A valuation model is used to assess the
fair value, taking into account the terms and conditions attached to the share-based payments. The fair value at grant date is determined
including the effect of market-based vesting conditions, to the extent such vesting conditions have a material impact.
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on the date on which the holders become fully entitled to the award ('the
vesting date').
The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been
modified. An additional expense is recognised for any modification, which increases the total fair value of the share-based payment
arrangement or is otherwise beneficial to the employee, as measured at the date of modification.
Where an equity-settled award (share options) is cancelled, it is treated as if it had vested on the date of cancellation if it had not yet
fully vested, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the
cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they
were a modification of the original award, as described in the previous paragraph.
Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is credited to the Income
Statement. Upon expiry of an equity-settled award, the cumulative charge expensed is transferred from the Share-based payment reserve
to retained earnings.
Equity
Equity comprises the following:
•
“Share capital” represents amounts subscribed for shares at nominal value.
•
“Share premium” represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
•
“Share-based payment reserve” represents the accumulated value of share-based payments.
•
“Retained earnings” represents the accumulated profits and losses attributable to equity shareholders.
•
“Translation reserve” represents the exchange differences arising from the translation of the financial statements of subsidiaries into
the Group’s presentational currency.
•
“Merger reserve” represents amounts arising from statutory merger relief arising on business combinations.
89
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
New and Amended International Financial Reporting Standards Adopted by the Group
The Group has adopted the following standards, amendments to standards and interpretations which are effective for the first time this
year. The impact is shown below:
New/Revised International Financial
Reporting Standards
Effective Date;
annual periods
beginning on or after
UKEB
adopted
Impact on
the Group
Various
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform – Phase 2
1 January 2021
Yes
No material
impact
International Financial Reporting Standards in Issue But Not Yet Effective
At the date of authorisation of the consolidated financial statements, the IASB and IFRS Interpretations Committee have issued standards,
interpretations and amendments which are applicable to the Group. For the next reporting period, applicable International Financial
Reporting Standards will be those endorsed by the UK Endorsement Board ('UKEB').
Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these consolidated
financial statements, the following could potentially have a material impact on the Group’s financial statements going forward:
New/Revised International Financial
Reporting Standards
Effective Date;
annual periods
beginning on or after
UKEB
adopted
Various
IAS 12
IAS 1
Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and
Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets,
Annual Improvements 2018-2020
1 January 2022
Amendments to IAS 12: Deferred Tax relating to Assets and Liabilities arising
from a Single Transaction
1 January 2023
Amendments to IAS 1: Classification of Liabilities as Current or Non-current and
Classification of Liabilities as Current or Non-current
1 January 2024
No
No
No
New / revised International Financial Reporting Standards which are not considered to potentially have a material impact on the Group’s
financial statements going forwards have been excluded from the above.
Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning
after the effective date of the pronouncement. New standards, interpretations and amendments not listed above are not expected to have
a material impact on the Group's financial statements.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with generally accepted accounting practice requires management to make
estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and
liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
The following are the key estimates used in applying the accounting policies of the Group that have the most significant effect on the
financial statements:
Reserve Estimates
Reserves are estimates of the amount of product that can be economically and legally extracted from the Group’s properties. In
order to calculate the reserves, estimates and assumptions are required about a range of geological, technical and economic factors,
including quantities, production techniques, recovery rates, production costs, transport costs, commodity demand, commodity prices
and exchange rates.
90
United Oil & Gas PLC Estimating the quantity and/or grade of reserves requires the size, shape and depth of fields to be determined by analysing geological data
such as drilling samples. This process may require complex and difficult geological judgements and calculations to interpret the data.
Given that the economic assumptions used to estimate reserves change from year to year, and because additional geological data is
generated during the course of operations, estimates of reserves may change from year to year. Changes in reported reserves may
affect the Group’s financial results and financial position in a number of ways, including the following:
• Asset carrying values may be affected by possible impairment due to adverse changes in estimated future cash flows;
• Depreciation, depletion and amortisation charged in the Income Statement may change where such charges are determined by the
units of production basis, or where the useful economic lives of assets change.
Purchase price allocation
In the prior year Management used valuation techniques when determining the fair value of assets transferred and liabilities acquired in
business combinations and the allocation of the purchase price thereto, which includes estimates to determine the valuation of assets.
Valuations prepared by an independent consultant taking into account risks involved in the business acquired were used to inform the
purchase price allocation for the business combination in 2020.
Information regarding the purchase price allocations is disclosed in note 12.
Impairment of property, plant and equipment
The Group assesses at each reporting date whether there is any indication that these assets may be impaired as indicated in note 11. If
such indication exists, the Group estimates the recoverable amount of the asset. The recoverable amount is assessed by reference to the
higher of ‘value in use’ (being the net present value of expected future cash flows of the relevant cash generating unit) and ‘fair value less
cost to sell’. The Group considers the quantities of the Proven and Probable Reserves, future production levels and future oil prices as well
as other IAS 36 criteria in their assessment of indicators of impairment. The directors do not believe there are any indicators of impairment
in respect of the assets.
Valuation of embedded derivatives within financial liability and standalone derivatives
In determining the value of both the embedded derivatives and standalone derivatives, the Group makes assumptions about future events
and market conditions. The fair value is determined using a valuation model which is dependent on further estimates.
Such assumptions are based on publicly available information and are detailed further in note 22. Different assumptions about these
factors to those made by the Group could materially affect the reported value of the embedded derivative liability.
As the financial liability is computed as the residual amount after deduction of the embedded derivative valuation, any material difference
in the value of the embedded derivative liability on initial recognition would materially reduce (or increase) the loan financial liability thus
increasing (or decreasing) the effective interest rate applicable.
The following are the significant judgements used in applying the accounting policies of the Group that have the most significant effect on
the financial statements:
Impairment of exploration licences
Management reviews intangible exploration assets for indicators of impairment under IFRS 6 – Exploration for and Evaluation of Mineral
Resources at the end of each reporting period. This review of assets for potential indicators of impairment requires judgement including
whether renewal of licences is planned, interpretation of the results of exploration activity and the extent to which the Group plans to
continue substantive expenditure on the assets. In determining whether substantive expenditure remains in the Group’s plan, management
considers factors including future oil prices, plans to develop or renew licences and future exploration plans. If impairment indicators exist
the assets are tested for impairment and carried at the lower of the estimated recoverable amount and net book value.
Fair value of consideration in relation to Crown disposal
Management have applied judgement in determining the consideration recognised for the Crown disposal in accordance with IFRS 5,
including a receivable for milestone payment of $2.5m.
91
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
2. SEGMENTAL REPORTING
Operating Segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The
chief operating decision maker, who is responsible for allocating resources, assessing the performance of the operating segment and
making strategic decision, has been identified as the Board of Directors.
The Group operates in four geographic areas – the UK, Europe and greater Mediterranean, Latin America and Egypt. The Group’s revenue
from external customers and information about its non-current assets (other than financial instruments, investments accounted for using
the equity method, deferred tax assets and post-employment benefit assets) by geographical location are detailed below.
2021
Revenue
Other income
UK
$
-
-
Other EU
$
Latin America
$
Egypt
$
Total
$
-
-
-
-
19,228,698
19,228,698
1,940,574
1,940,574
Non-current assets
505,963
2,518,642
4,460,303
17,921,194
25,406,102
2020
Revenue
-
-
-
9,053,657
9,053,657
Non-current assets
779,323
2,833,287
3,602,178
14,284,122
21,498,910
92
United Oil & Gas PLC 3. COST OF SALES
Production costs
Depreciation, depletion & amortisation
4. OPERATING PROFIT
Operating loss is stated after charging/(crediting):
Depreciation:
Owned assets
Right of use leased assets
Amortisation
Share based payments
Foreign exchange losses / (gains)
Fees payable to the Company’s auditors for the audit of the annual financial statements
31 December
2021
$
31 December
2020
$
4,906,713
4,005,102
8,911,815
3,941,743
2,563,268
6,505,011
31 December
2021
$
31 December
2020
$
4,009,427
2,566,668
98,258
3,985
325,375
356,850
70,000
62,322
3,862
267,766
(189,918)
60,000
93
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
5. DIRECTORS AND EMPLOYEES
The aggregate payroll costs of the employees, including Executive Directors and Non-Executive directors, were as follows:
Staff costs
Wages and salaries
Share-based payments
Pension
Social security
Average monthly number of persons employed by the Group during the year was as follows:
By activity
Administrative
Directors
Remuneration of Directors
Emoluments and fees for qualifying services
Share-based payments
Pension
Social security
Key management personnel are identified as the Executive Directors.
31 December
2021
$
31 December
2020
$
1,939,014
1,700,487
325,375
130,479
104,915
267,766
135,059
60,640
2,499,783
2,163,952
2021
2020
7
6
13
6
6
12
31 December
2021
$
31 December
2020
$
890,604
238,360
76,694
41,396
1,149,729
229,040
53,251
21,743
1,247,054
1,453,763
94
United Oil & Gas PLC 6. FINANCE INCOME AND EXPENSE
Finance income
Fair value gain on derivatives
Finance expense
Fair value loss on derivatives
Effective interest on borrowings
Interest expense on lease liabilities
7. TAXATION
Profit before tax
Loss on ordinary activities multiplied by standard rate of corporation tax in the
UK of 19% (2020: 19%)
Tax effects of:
Foreign tax
Adjustments in respect of prior periods
Utilisation of tax losses
Corporation tax charge / (credit)
31 December
2021
$
31 December
2020
$
-
-
1,572,706
1,572,706
31 December
2021
$
31 December
2020
$
1,527,250
1,381,083
14,421
-
1,576,607
4,235
2,922,754
1,580,842
31 December
2021
$
31 December
2020
$
5,935,976
796,181
1,127,835
151,274
1,940,574
-
(78,692)
(56,480)
(744,956)
(151,274)
1,861,882
(56,480)
The Group has accumulated UK tax losses of approximately $5.5m (2020: $8.0m). No deferred tax asset was recognised in respect of
these accumulated tax losses as there is insufficient evidence that the amount will be recovered in future years.
95
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
8. EARNINGS PER SHARE
The Group has issued share warrants and options over Ordinary shares which could potentially dilute basic earnings per share in the
future. Further details are given in note 18.
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the year.
There were 113,697,454 (2020: 130,510,730) share warrants and options outstanding at the end of the year that could potentially dilute
basic earnings per share in the future.
Basic and diluted earnings per share:
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
2021
Cents
0.64
0.62
2020
Cents
0.15
0.14
The profit and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Profit used in the calculation of total basic and diluted earnings per share
4,074,094
852,661
2021
$
2020
$
Number of shares:
Weighted average number of ordinary shares for the purposes of basic earnings
per share
Dilutive shares
Weighted average number of ordinary shares for the purposes of diluted
earnings per share
2021
2020
637,482,325
578,248,726
24,871,644
23,207,377
662,353,969
601,456,103
96
United Oil & Gas PLC 9. SUBSIDIARIES
Details of the Group’s subsidiaries in 2021 are as follows:
Name and address of subsidiary
Principal
activity
Class of
shares
Place of
incorporation
and operation
UOG Holdings PLC
200 Strand, London, WC2R 1DJ
UOG Ireland Limited 1
9 Upper Pembroke Street, Dublin 2, Ireland
Intermediate
holding company
Intermediate
holding company
Ordinary
England and
Wales
Ordinary
Ireland
UOG PL090 Ltd 1
200 Strand, London, WC2R 1DJ
UOG Italia Srl 1
Viale Gioacchino Rossini 9, 00198, Rome, Italy
UOG Jamaica Ltd 1
200 Strand, London, WC2R 1DJ
UOG Crown Ltd 1
200 Strand, London, WC2R 1DJ
UOG Colter Ltd 1
200 Strand, London, WC2R 1DJ
UOG Egypt Pty
Sydney 2000, New South Wales, Australia
1 Held indirectly by United Oil & Gas Plc
Oil and gas
exploration
Oil and gas
exploration
Oil and gas
exploration
Oil and gas
exploration
Oil and gas
exploration
Oil and gas
exploration
Ordinary
England and
Wales
Ordinary
Italy
Ordinary
Ordinary
Ordinary
England and
Wales
England and
Wales
England and
Wales
Ordinary
Australia
% ownership held
by the Group
2021
2020
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
97
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices
Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
10. INTANGIBLE ASSETS
Cost
At 1 January 2020
Acquired in business combinations
Additions
Transfer to production assets
Disposals
Foreign exchange differences
At 31 December 2020
Additions
Disposals
Transferred to non-current assets held for sale
Foreign exchange differences
At 31 December 2021
Amortisation and impairment
At 1 January 2020
Charge for the year
Impairment
Foreign exchange differences
At 31 December 2020
Charge for the year
Impairment
Foreign exchange differences
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
98
Exploration
and Evaluation
assets $
Computer
software
$
Total
$
7,739,512
3,181,362
1,457,307
(2,538,981)
(31,307)
336,529
10,144,422
3,013,536
(2,576,724)
(2,519,240)
11,374
-
-
-
-
1,070
12,444
-
-
(970)
(236,979)
11,474
7,825,015
-
3,862
-
286
4,148
3,985
-
(483)
7,650
3,824
8,296
2,158,648
3,862
37,161
53,008
2,252,679
3,985
624,546
(26,286)
2,854,924
4,970,091
7,891,743
7,728,138
3,181,362
1,457,307
(2,538,981)
(31,307)
335,459
10,131,978
3,013,536
(2,576,724)
(2,519,240)
(236,009)
7,813,541
2,158,648
-
37,161
52,722
2,248,531
-
624,546
(25,803)
2,847,274
4,966,267
7,883,447
United Oil & Gas PLC At 31 December 2021 the group’s E&E carrying values of $5m related to our high impact exploration activity in Jamaica, and the UK North
Sea exploration/development work programmes.
In Egypt United and its partners drilled, tested and took onstream two successful exploration wells in 2021, and as a result all exploration
spend in Egypt to date has been transferred to PP&E as per the technical guidance of IFRS 6. Total was $2.5m transferred to PP&E in 2021.
In Jamaica technical work continues on the Work Programme to establish the development options on the Colibri prospect, in conjunction
with a farm out process that continues to attract interest. In November 2021 a new exploration extension was granted taking the licence
period out until end January 2024. At year end the carrying value of our exploration activity in Jamaica amounted to $4.5m.
In the UK North Sea the Company has Intangibles of $0.5m at year end, representing amount capitalised to date on the Maria discovery
and Zeta exploration prospect. In 2021 we announced a binding sale and purchase agreement to sell these licences, an agreement that
subsequently failed to complete and was announced in March 2022. We continue to review the options to commercialise the Maria
discovery and in the meantime will continue with a work programme involving some Seismic data purchase, Rock physics and seismic
inversion, and have a new CPR report later in the year.
The Company’s Italian assets are now recategorised to Assets Held for sale ('AHFS'), at $2.6m having signed a conditional SPA with PXOG
Marshall Limited, a subsidiary of Prospex Energy PLC ('Prospex') for the sale of 100% of the share capital of UOG Italia Srl for a consideration
of €2.165m (c. $2.54m) with an effective date of 1 Jan 2021.
Commitments on the Waddock Cross licence have stalled pending the outcome of some discussions with the Operator to relinquish our
26.25% interest in the licence. Whilst the Operator continues to progress the work programme ahead of any well campaign, we believe at this
stage full value most likely cannot be recovered in the medium term by the Company and as such the Directors believed it prudent at this
stage to impair the carrying value of $625k.
Management reviews the intangible exploration assets for indications of impairment at each balance sheet date based on IFRS 6 criteria
such as where commercial reserves have not yet been established and the evaluation, exploration work is ongoing and a development
plan has not been approved. The Directors believe the only impairment indicators relate to Waddock Cross (as described above) and have
impaired all associated costs to date accordingly, with all remaining assets described continuing to be carried at cost.
99
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
11. PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 January 2020
Acquired in business combinations
Transfer from E&E assets
Additions
Disposals
Foreign exchange differences
At 31 December 2020
Transfer from production assets
Additions
Disposals
Foreign exchange differences
10,630,944
2,538,981
2,806,734
-
-
15,976,659
2,576,724
5,900,375
-
-
At 31 December 2021
24,453,758
Depreciation
At 1 January 2020
Charge for the year
Disposals
Foreign exchange differences
At 31 December 2020
Charge for the year
Disposals
Foreign exchange differences
At 31 December 2021
Net book value
At 31 December 2021
At 31 December 2020
-
2,563,268
-
-
2,563,268
4,005,103
-
-
6,568,371
17,885,387
13,413,391
Production
assets
$
Computer
equipment
$
Fixtures and
fittings
$
Right of use
asset
$
Total
$
-
8,589
114,775
123,364
-
-
6,755
-
(1,638)
13,706
-
-
-
(1,068)
12,638
5,812
3,169
-
(1,665)
7,316
3,373
-
(706)
9,983
2,655
6,390
-
-
61,127
10,692,071
2,538,981
2,971
204,763
3,021,223
-
-
(186,700)
(186,700)
10,799
9,161
2,971
204,764
16,198,100
-
-
-
-
2,576,724
42,951
5,943,326
(43,862)
(43,862)
(231)
(13,820)
(15,119)
2,740
190,033
24,659,169
-
231
-
17
248
951
-
90,830
96,642
62,322
2,628,990
(144,382)
(144,382)
11,331
9,683
20,101
2,590,933
98,258
4,107,685
(16,625)
(16,625)
(57)
(12,870)
(13,633)
1,142
88,864
6,668,360
1,598
2,723
101,169
17,990,809
184,663
13,607,167
Depreciation is recognised within administrative expenses.
Management reviews the property, plant and equipment for indications of impairment at each balance sheet date in accordance with IAS
36. No indications of impairment have been identified at either 31 December 2021 or 31 December 2020.
100
United Oil & Gas PLC 12. BUSINESS COMBINATIONS
On 28 February 2020, the company announced that it had completed the acquisition of 100% of the equity share capital of UOG Egypt Pty
Ltd (formerly Rockhopper Egypt Pty Ltd). from Rockhopper Exploration plc ('Rockhopper').
The Acquisition, which had an effective date of 1 January 2019, included a 22% non-operating interest in the producing Abu Sennan
concession, onshore Egypt. The consideration payable to Rockhopper for the Acquisition was US$16 million which was funded by:
•
the issue to Rockhopper of 114,503,817 Consideration Shares at 3 pence per Ordinary Share representing 18.5% of the Company's
Enlarged Ordinary Share Capital,
• a pre-payment financing structure of US$8 million provided by BP ('the BP Facility') and
•
the issue of 150,616,669 Placing Shares at 3 pence per share with certain existing and new investors and 8,419,498 Subscription
Shares also at 3 pence per share.
No goodwill has been recognised on the acquisition because the fair value of the identifiable net assets was the same as the fair value of
the consideration transferred, as shown in the table below.
Fair value of consideration transferred
Cash
Liabilities assumed
Shares issued
Recognised amounts of identifiable net assets
Intangible assets
Property, plant and equipment
Total non-current assets
Inventory
Trade and other receivables
Cash at bank and in hand
Total current assets
Trade and other payables
Lease liabilities
Total current liabilities
Fair value of net assets acquired
The fair value of acquired receivables was equal to the contractual amounts receivable and all cash flows were collected.
$
11,500,000
3,259,090
3,933,276
18,692,366
3,181,362
10,692,071
13,873,433
100,162
4,759,717
46,543
4,906,422
(25,337)
(62,152)
(87,489)
18,692,366
101
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
Net cash outflow on acquisition of subsidiary
Consideration paid in cash
Less: cash and cash equivalent balances acquired
Total
$
11,500,000
(46,543)
11,453,457
Post-acquisition Contribution
The acquisition of UOG Egypt contributed $9,053,657 revenue and $2,136,680 profit to the Group’s results for the year acquired.
If UOG Egypt had been acquired on 1 January 2020, revenue of the Group for the year would have been $11,192,276 and profit for the year
would have been $5,754,327.
13. NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE
On 11 April 2022 United announced the completion of the sale of 100% of the share capital of UOG Italia Srl to PXOG Marshall Limited, a
subsidiary of Prospex Energy PLC ('Prospex'), for a consideration of €2,164,701 (c. $2.54m).
Assets and liabilities held for sale
The following major classes of assets and liabilities relating to these operations have been classified as held for sale in the consolidated
balance sheet at 31 December 2021:
Intangible assets
Trade and other receivables
Cash at bank and in hand
Assets held for sale
Trade and other payables
Liabilities held for sale
Elimination of
inter-company
payables
$
-
-
-
-
UOG Italia
$
2,519,240
28,588
508
2,548,336
(2,456,775)
2,340,727
(2,456,775)
2,340,727
Fair value
adjustment
$
Total held
for sale
$
12,914
2,532,154
-
-
28,588
508
12,914
2,561,250
-
-
(116,048)
(116,048)
Fair value measurement
The fair value of the net assets of $2,445,202 are categorised as level 3 non-recurring fair value measurements.
The fair valuations have been determined by reference to signed disposal agreements, in relation to which non-refundable deposits have
been received.
102
United Oil & Gas PLC Gain on disposal
The net gain on disposal recognised in the income statement is comprised of:
Gain on disposal of UOG Italia net of disposal expenses incurred
Loss on aborted North Sea Quattro disposal
14. INVENTORY
Oil in tanks
15. TRADE AND OTHER RECEIVABLES
Trade receivables
Other tax receivables
Prepayments
Contract assets
Crown disposal proceeds due
$
233,357
(114,706)
118,651
2020
$
35,729
35,729
2020
$
-
77,529
7,984
2,518,794
2,850,000
5,454,307
2021
$
145,570
145,570
2021
$
2,257,609
71,764
7,361
2,865,287
2,500,000
7,702,021
The Directors consider that the carrying values of trade and other receivables are approximate to their fair values.
No expected credit losses exist in relation to the Group’s receivables as at 31 December 2021 (2020: $nil).
Contract assets relate to two months oil and three months gas invoices for the Abu Sennan producing assets in Egypt under the receivable
terms of the agreement with EGPC.
Crown disposal proceeds due are being carried at the full value expected to be received.
103
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
16. CASH AND CASH EQUIVALENTS
Cash at bank (GBP)
Cash at bank (EUR)
Cash at bank (USD)
Cash at bank (EGY)
2021
$
50,831
16,286
3,226
326,965
397,308
2020
$
132,913
25,561
16,980
2,013,448
2,188,902
At 31 December 2021 and 2020 all significant cash and cash equivalents were deposited in creditworthy financial institutions in UK, Ireland
and Egypt.
17. SHARE CAPITAL, SHARE PREMIUM AND MERGER RESERVE
Allotted, issued, and fully paid:
Ordinary shares of £0.01 each
At 1 January 2021
Allotments:
Number
Share capital
$
2021
Share premium
$
625,153,969
8,138,619
16,047,975
Shares issued for cash (exercise of warrants)
19,650,000
277,563
167,386
At 31 December 2021
644,803,969
8,416,182
16,215,361
Ordinary shares of £0.01 each
At 1 January 2020
Allotments:
Shares issued in consideration for business combination
Shares issued for cash
Shares issued for cash (exercise of warrants)
Share issue expenses
At 31 December 2020
Number
Share capital
$
2020
Share premium
$
345,613,985
4,564,787
9,912,988
114,503,817
159,036,167
6,000,000
1,463,002
2,031,987
78,843
2,470,274
4,051,541
118,266
-
-
(505,094)
625,153,969
8,138,619
16,047,975
As regards income and capital distributions, all categories of shares rank pari passu as if the same constituted one class of share.
104
United Oil & Gas PLC 18. SHARE-BASED PAYMENTS
Share Options
Details of the number of share options and the weighted average exercise price ('WAEP') outstanding during the year are as follows:
2021
Outstanding at the beginning of the year
Issued
Expired
Outstanding at the year end
Number vested and exercisable at 31 December 2021
2020
Outstanding at the beginning of the year
Issued
Outstanding at the year end
Number vested and exercisable at 31 December 2020
Number of
Options
46,767,690
3,939,665
(1,102,941)
49,604,414
-
Number of
Options
11,117,647
35,650,043
46,767,690
-
WAEP
£
0.04
0.04
0.04
0.04
-
WAEP
£
0.05
0.04
0.04
-
The fair values of share options issued in the current financial year were calculated using the Black Scholes model as follows:
Date of grant
Number granted
Share
options
1 Aug
2021
Share
options
4 Jan
2021
Share
options
27 Oct
2020
Share
options
29 Sep
2020
Share
options
1 Jul
2020
Share
options
17 Jun
2020
Share
options
20 Mar
2020
2,597,403
1,342,282
1,481,481
1,565,741
6,107,843
14,767,500
8,060,811
Share price at date of grant
Exercise price
£0.04
£0.04
£0.03
£0.03
£0.03
£0.03
£0.03
£0.03
£0.03
£0.03
£0.03
£0.04
£0.01
£0.04
Expected volatility
59,25%
83.28%
85.31%
85.27%
82.66%
82.01%
65.31%
Expected life from date of grant
(years)
6.5
6.5
6.5
6.5
6.5
6.5
6.5
Risk free rate
0.2867%
-0.0678%
-0.0384%
-0.0821%
-0.0280%
-0.0322%
0.2543%
Expected dividend yield
0%
0%
0%
0%
0%
0%
0%
Fair value at date of grant
£0.021
£0.021
£0.018
£0.019
£0.018
£0.019
£0.004
Earliest vesting date
1 Aug 2024
4 Jan 2024 27 Oct 2023 29 Sep 2023
1 Jul 2023 17 Jun 2023 20 Mar 2023
Expiry date
1 Aug 2031
4 Jan 2031 27 Oct 2030 29 Sep 2030
1 Jul 2030 17 Jun 2030 20 Mar 2030
Expected volatility was determined based on the historic volatility of the Company’s shares for a period averaging 1 year. 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 Group recognised total expenses of $325,375 (2020: $267,766) in the income statement in relation to share options accounted for as
equity-settled share-based payment transactions during the year.
105
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
Warrants
Details of the number of share warrants and the weighted average exercise price ('WAEP') outstanding during the year are as follows:
2021
Outstanding at the beginning of the year
Exercised
Outstanding at the year end
Number vested and exercisable at 31 December 2021
2020
Outstanding at the beginning of the year
Issued
Exercised
Outstanding at the year end
Number vested and exercisable at 31 December 2020
Number of
Options
83,743,040
(19,650,000)
64,093,040
64,093,040
Number of
Options
82,212,206
7,530,834
(6,000,000)
83,743,040
83,743,040
WAEP
£
0.04
0.02
0.05
-
WAEP
£
0.04
0.03
0.03
0.04
0.04
The fair values of share warrants issued or extended in the current and previous financial year were calculated using the Black Scholes model
as follows:
Date of grant
Number granted
Share price at date of grant
Exercise price
Expected volatility
Expected life from date of grant (years)
Risk free rate
Expected dividend yield
Fair value / incremental fair value at date of grant
Earliest vesting date
Share warrants
28 Feb 2020
7,530,834
£0.03
£0.03
49.57%
1.5
0.2813%
0%
£0.0064
28 Feb 2020
Expected volatility was determined based on the historic volatility of a comparable company’s shares for a period averaging 1 year. 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 Group recognised total expenses of $nil (2020: $62,516) in relation to share warrants accounted for as equity-settled share-based
payment transactions during the year in relation. These were recognised as follows:
$nil (2020: $62,516) as a deduction from share premium related to share warrants accounted for as equity-settled share-based payment
transactions during the year.
106
United Oil & Gas PLC 19. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Deferred shares (note 20)
Accruals
2021
$
1,180,088
1,599,414
40,476
2,602,756
5,422,734
2020
$
836,759
1,431,078
40,739
687,539
2,996,115
20. DEFERRED SHARES
On 12 October 2015, the Company issued 30,000 Deferred Shares of £1 for £30,000 to the founder, which have an entitlement to a non-
cumulative annual dividend at a fixed rate of 0.1 per cent of their nominal value. The Deferred Shares have no voting rights attached to
them and may be redeemed in their entirety by the Company for an aggregate redemption payment of £1.
21. LEASES
Right of Use Assets
The Group used leasing arrangements relating to property, plant and equipment. As the Group has the right of use of the asset for the
duration of the lease arrangement, a “right of use” asset is recognised within property, plant and equipment.
When a lease begins, a liability and right of use asset are recognised based on the present value of future lease payments.
Interest expense on lease liabilities
Total cash outflow for leases
Additions to right-of-use assets
Disposals from right-of-use assets
Depreciation charge – right of use assets
Foreign exchange movement on right of use assets
Right of use assets - carrying amount at the beginning of the year:
Carrying amount at the end of the year:
Lease liabilities
Current
Non-current
2021
$
14,421
(83,335)
42,951
(27,237)
(98,258)
(949)
184,663
101,169
2021
$
83,368
24,494
2020
$
4,235
(78,936)
265,890
(42,318)
(62,322)
(532)
23,945
184,663
2020
$
94,050
96,787
107,862
190,837
107
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
22. BORROWINGS AND DERIVATIVES
Amounts payable on borrowings held by the Group falling due within one year and in more than one year are:
Secured – at amortised cost
Other loans
Current
Non-current
The assets of the Group are held as security against the loan.
Separated embedded derivative
Loan derivative liability (current)
Loan derivative liability (non-current)
Other derivative financial instruments
Hedge derivative liability (current)
2021
$
2020
$
2,422,212
2,422,212
-
2,422,212
2021
$
1,346,044
-
4,555,801
2,133,655
2,422,146
4,555,801
2020
$
904,702
647,376
1,346,044
1,552,078
-
87,979
Summary of Borrowing Arrangements
In February 2020, the Group entered into a prepaid commodity swap arrangement for $8 million to part-finance the acquisition of Rockhopper
Egypt Pty Ltd. The repayment schedule provided for 30 monthly repayments which were structured as a fixed notional amount with variations
based on movements in oil prices with a cap. During 2020 modifications were agreed to the loan whereby there was a three-month period
where payments were suspended and the deferred amounts were rolled into payments in the final 12 months of the loan.
Due to the price structure, the arrangement includes an embedded derivative (a forward contract). For financial reporting purposes, this must
be separately accounted for at fair value at each balance sheet date. The balance of proceeds that did not relate to the derivative were treated
as the opening carrying amount of the loan which will then be measured at amortised cost over its life, with finance charges recognised to
give an even return over the loan life and repayments of capital allocated appropriately.
As at 31 December 2021, a fair value loss has been recognised (as finance expense) as a result of oil price movements in the period and on
forward price rates.
In January 2022 the Group extended the final maturity date on the facility from 30 September 2022 to 31 December 2023.
The valuations of the host debt and derivative on initial recognition and valuation of the remaining embedded derivative as at 31 December
2021 were undertaken using data provided by independent third parties.
The fair value of the contracts has been estimated using a valuation technique that maximises the use of observable market inputs. These are
classified as Level 2 in the fair value hierarchy (see note 23).
108
United Oil & Gas PLC Reconciliation of liabilities arising from financing activities
2021
Loan
At 1
January
2021
$
4,555,801
Embedded derivative
1,552,078
Derivative
2020
Loan
Embedded derivative
Derivative
87,979
6,195,858
At 1
January
2020
$
-
-
-
-
Cash
received
$
Interest
accrued
$
Repaid in
cash
$
Fair value
movements
$
FX
movements
$
At 31
December
2021
$
-
-
-
-
1,381,083
(3,518,359)
-
3,687
2,422,212
-
-
(1,666,975)
1,477,118
(16,177)
1,346,044
(138,111)
50,132
-
-
1,381,083
(5,323,445)
1,527,250
(12,490)
3,768,256
Cash
received
$
Interest
accrued
$
Repaid in
cash
$
Fair value
movements
$
FX
movements
$
At 31
December
2020
$
4,853,381
1,576,607
(1,866,712)
-
(7,475)
4,555,801
2,906,907
-
-
-
200,596
(1,731,116)
175,691
1,552,078
(70,431)
158,410
-
87,979
7,760,288
1,576,607
(1,736,547)
(1,572,706)
168,216
6,195,858
Fair value movements are recognised in finance income (see note 6).
109
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
23. FINANCIAL INSTRUMENTS
Classification of Financial Instruments
The fair value hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the
fair value of the financial assets and liabilities.
The fair value hierarchy has the following levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair
value measurement.
The only financial instruments measured at fair value in the balance sheet are the embedded derivatives and standalone derivatives which
are classified as Level 2 according to the above definitions. There were no transfers in or out of Level 2 in the year.
There are no financial instruments classified at Level 1 or Level 3 in the years presented.
The tables below set out the Group’s accounting classification of each class of its financial assets and liabilities.
Financial assets measured at amortised cost
Trade receivables (note 15)
Contract assets (note 15)
Crown disposal proceeds due (note 15)
Cash and cash equivalents (note 16)
2021
$
2,257,609
2,865,287
2,500,000
397,308
8,020,204
2020
$
-
2,518,794
2,850,000
2,188,902
7,557,696
All of the above financial assets’ carrying values are approximate to their fair values, as at 31 December 2021 and 2020.
Financial liabilities
Measured at amortised cost
Trade payables (note 19)
Other payables (note 19)
Lease liabilities (note 21)
Borrowings (note 22)
Accruals (note 19)
2021
$
1,180,088
1,599,414
107,862
2,422,212
2,602,756
7,912,332
2020
$
836,759
1,431,078
190,837
4,555,801
687,539
7,702,014
In the view of management, all of the above financial liabilities’ carrying values approximate to their fair values as at 31 December 2021
and 2020.
110
United Oil & Gas PLC Financial liabilities
Derivative financial instruments (note 22)
Measured at fair value through
profit or loss
2021
$
1,346,044
1,346,044
2020
$
1,640,057
1,640,057
Fair Value Measurements
This note provides information about how the Group determines fair values of various financial assets and financial liabilities.
Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis
The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial
statements approximate their fair values (due to their nature and short times to maturity).
Fair value of financial liabilities that are measured at fair value on a recurring basis
The fair value of derivative financial instruments has been estimated using a valuation technique that maximises the use of observable
market inputs.
24. FINANCIAL INSTRUMENT RISK EXPOSURE AND MANAGEMENT
The Group’s operations expose it to degrees of financial risk that include liquidity risk, credit risk, interest rate risk.
This note describes the Group’s objectives, policies and process for managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented in notes 15, 16, 19, 21, 22, 23 and 25.
Liquidity Risk
Liquidity risk is dealt with in note 25 of these financial statements.
Credit Risk
The Group’s credit risk is primarily attributable to its cash balances.
The credit risk on liquid funds is limited because the third parties are large international banks with a minimum investment grade credit rating.
The Group’s total credit risk amounts to the total of other receivables and cash and cash equivalents. Credit assessments are routinely
reviewed on all of the Group’s joint venture partners and other counterparties.
Interest Rate Risk
The Group’s only exposure to interest rate risk is the interest received on the cash held on deposit, which is immaterial. The Group’s
borrowings outstanding at 31 December 2021 and 31 December 2020 are structured in such a way, through the use of a pre-paid
commodity swap, so that the notional interest charge is fixed and therefore there is no interest rate risk.
Commodity Price risk
The company manages its exposure to commodity price risk on an ongoing basis. As described in note 12, the loan for the acquisition
of Rockhopper Egypt also involved a derivative arrangement to manage the exposure arising from having the loan payments based on
oil quantities rather than a fixed cash price. The combined put and call arrangements provide the group with protection against price
movements on either side of a protected collar.
111
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
Foreign Exchange Risk
The Group is exposed to foreign exchange movements on monetary assets and liabilities denominated in currencies other than USD. The
Group's transactions are carried out in GBP, EUR and USD.. Operational transactions are carried out predominantly in USD but also in GBP,
EUR and EGP.
The monetary assets and liabilities denominated in currencies other than USD are relatively immaterial (see notes 15 and 16) and
transactional risk is considered manageable.
The Group does not hold material non-domestic balances and currently does not consider it necessary to take any action to mitigate
foreign exchange risk due to the immateriality of that risk.
25. LIQUIDITY RISK
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet liabilities as they fall due.
In managing liquidity risk, the main objective of the Group is therefore to ensure that it has the ability to pay all of its liabilities as they
fall due. The Group monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due. The table below
shows the undiscounted cash flows on the Group’s financial liabilities as at 31 December 2021 and 2020, on the basis of their earliest
possible contractual maturity.
Derivative financial instruments
1,346,044
Accruals
2,602,756
At 31 December 2021
Trade payables
Other payables
Lease liabilities
Borrowings
At 31 December 2020
Trade payables
Other payables
Lease liabilities
Borrowings
Payable on
demand
$
Total
$
Within 2
months
$
Within
2 -6
months
$
Within
6 – 12
months
$
Within
1-2
years
$
Within
2-5
years
$
1,180,088
-
1,180,088
1,599,414
1,599,414
-
-
-
-
-
-
-
-
-
116,359
2,769,947
-
-
-
-
18,526
33,250
37,813
17,568
9,202
692,487
1,384,973
692,487
-
-
-
1,346,044
2,602,756
-
-
-
-
-
-
-
9,614,608
1,599,414
1,891,101
4,020,979
2,076,344
17,568
9,202
836,759
-
836,759
1,431,078
1,431,078
-
-
-
-
-
-
-
-
-
210,007
6,288,305
-
-
-
-
22,081
31,937
54,630
93,963
7,396
533,346
1,066,692
1,918,320
2,769,947
-
-
-
87,980
687,539
-
-
-
-
-
-
Derivative financial instruments
87,980
Accruals
687,539
9,541,668
1,431,078
1,392,186
1,786,168
2,060,930
2,863,910
7,396
112
United Oil & Gas PLC 26. CAPITAL MANAGEMENT
The Group’s capital management objectives are:
• To provide long-term returns to shareholders; and
• To ensure the Group’s ability to continue as a going concern.
The Group defines and monitors capital on the basis of the carrying amount of equity plus borrowings less cash and cash equivalents as
presented on the face of the balance sheet and as follows:
Equity
Borrowings
Cash and cash equivalents
2021
$
2020
$
24,294,904
19,659,650
2,422,212
4,555,801
(397,308)
(2,188,902)
26,319,808
22,026,549
The Board of Directors monitors the level of capital as compared to the Group’s commitments and adjusts the level of capital as is
determined to be necessary by issuing new shares. The Group is not subject to any externally imposed capital requirements.
These policies have not changed in the year. The Directors believe that they have been able to meet their objectives in managing the capital
of the Group.
27. RELATED PARTY TRANSACTIONS
Key management personnel are identified as the Executive Directors, and their remuneration is disclosed in note 5.
28. FINANCIAL COMMITMENTS
As at 31 December 2021, the Group’s commitments comprise their producing assets and exploration expenditure in Egypt and exploration
expenditure in the Walton-Morant licence. These commitments have been summarised below:
Exploration/Production Licence
Abu Sennan
Crown
Colter
Walton Morant
Selva Malvezzi
Waddock Cross
31 December
2021
$
31 December
2022
$
4,629,900
5,639,920
140,000
-
402,500
82,564
47,198
-
-
359,100
-
-
5,302,162
5,999,020
113
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Consolidated Financial Statements
For the year-ended 31 December 2021
29. ULTIMATE CONTROLLING PARTY
The directors do not consider there to be an ultimate controlling party.
30. EVENTS AFTER THE BALANCE SHEET DATE
Pre-paid swap facility extension
On the 3 March 2022 the Company provided a corporate update to the market in which it announced it has extended the final maturity date
on its existing prepayment facility from 30 September 2022 to 31 December 2023. The new terms provide downside protection at $70/bbl
for a volume of bbls through to end December 2023.
UK Central North Sea Licences ('UK CNS') Sale & Purchase Agreement termination
On the 3 March 2022 the Company announced the termination of the SPA with Quattro Energy Ltd. signed in September 2021 for the sale
of its UK Central North Sea Licences; P2480 and P2519 for a consideration of up to £3.2m (c$4.4m) and the licences have been retained
as part of the Company’s portfolio.
Crown milestone settlement agreement
On the 23 March 2022 the company announced that a confidential settlement agreement ('Settlement Agreement') has been signed
between Anasuria Hibiscus UK Ltd ('AHUK') and United for the Crown disposal milestone payment. United will receive $2,500,000 in
three separate instalments in 2022, the first of which being $500,000 was received on 25 March 2022 with the subsequent receipts of
$1,000,000 on 29 June 2022 and $1,000,000 on 29 December 2022. Subject to the full amount being received, this will bring an end to the
matter and no further amounts will be due to United from AHUK in connection with the sale of licence P2366. This has been accounted for
in the 2021 accounts.
Completion of Italian asset divestment
On the 11 April 2022 United announced the completion of the sale of 100% of the share capital of UOG Italia Srl to PXOG Marshall Limited,
a subsidiary of Prospex Energy PLC ('Prospex'), for a consideration of €2,164,701 (c. $2.54m).
The company has received final completion proceeds of €2,190,966 being the balance of the consideration plus a working capital adjustment
from the effective date of €134,500 less the deposit of €108,235 which was received in August 2020. Completion of the transaction means
that United will now exit all activities in Italy and therefore be no longer liable for a share of the Selva gas development.
114
United Oil & Gas PLC
NON-IFRS MEASURES
The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting
principles.
Cash-operating Costs Per Barrel
Cash operating costs are defined as cost of sales less depreciation, depletion and amortisation, production based taxes, movements in
inventories and certain other immaterial cost of sales.
Cash operating costs are then divided by barrels of oil equivalent produced to demonstrate the cash cost incurred to producing oil and gas
from the Group’s producing assets.
Cost of Sales
Less
Depreciation, depletion and amortisation
Inventories
Cash operating costs
Production (boepd)
Cash Operating Cost BOE ($)
31 December
2021
$
31 December
2020
$
8,911,815
6,505,011
(4,005,102)
(2,563,268)
109,841
(64,433)
5,016,554
3,877,310
2,327
5.90
2,195
5.77
EBITDAX
EBITDAX is earnings from continuing activities before interest, tax, depreciation, amortisation, reversal of impairment, and exploration
expenditure and exceptional items in the current year.
Operating Income
Depreciation, Depletion & Amortisation
Exploration Expense
31 December
2021
$
31 December
2020
$
8,858,730
804,317
4,107,685
2,628,990
624,546
37,161
13,590,961
3,470,468
115
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Company Balance Sheet
For the year-ended 31 December 2021
Assets:
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Equity and liabilities:
Capital and reserves
Share capital
Share premium
Share-based payment reserve
Retained losses:
Opening retained losses
Loss for the year
Total retained losses
Shareholders’ funds
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax payable
Deferred shares
Current liabilities
Borrowings
Derivative financial instruments
Total liabilities
Total equity and liabilities
31 December
2021
£
31 December
2020
£
Note
2
3
4
8
8
5
7
7
7
7
16,127,081
16,127,081
8,644,211
36,115
8,680,326
7,808,453
105,907
7,914,360
24,807,407
24,041,441
6,448,040
6,251,540
12,406,752
12,288,252
1,705,488
1,468,691
(4,095,266)
(3,493,499)
(3,576,132)
(519,134)
(7,588,765)
(4,095,266)
12,971,515
15,913,217
8,970,507
1,795,295
997,661
42,429
30,000
3,435,895
1,571,224
731,010
99,699
30,000
11,835,892
5,867,828
-
-
-
11,835,892
1,783,668
476,728
2,260,396
8,128,224
24,807,407
24,041,441
The notes to these financial statements form an integral part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for their issue on 25 April 2022 and were signed on its behalf by:
Brian Larkin
Chief Executive Officer
116
Registered number: 09624969
United Oil & Gas PLC
Company Statement of Changes in Equity
For the year-ended 31 December 2021
For the year ended 31 December 2021
Balance at 1 January 2021
Loss for the financial year
Total comprehensive income
Transactions with owners:
Share based payments
Shares issued
Total transactions with owners
Share
capital
£
Share
premium
£
Share-based
payments
reserve
£
Retained
earnings
£
Total
£
6,251,540
12,288,252
1,468,691
(4,095,266)
15,913,217
-
-
-
-
-
-
196,500
196,500
118,500
118,500
-
-
(3,493,499)
(3,493,499)
(3,493,499)
(3,493,499)
236,797
-
236,797
-
-
-
236,797
315,000
551,797
Balance at 31 December 2021
6,448,040
12,406,752
1,705,488
(7,588,765)
12,971,515
For the year ended 31 December 2020
Balance at 1 January 2020
Loss for the financial year
Total comprehensive income
Transactions with owners:
Share based payments
Shares issued
Share issue expenses
3,456,140
7,486,946
1,212,326
(3,576,132)
8,579,280
-
-
(519,134)
(519,134)
(519,134)
(519,134)
-
-
-
-
-
-
2,795,400
5,210,292
207,840
-
-
(408,986)
48,525
-
-
-
-
207,840
8,005,692
(360,461)
7,853,071
Total transactions with owners
2,795,400
4,801,306
256,365
Balance at 31 December 2020
6,251,540
12,288,252
1,468,691
(4,095,266)
15,913,217
The notes to these financial statements form an integral part of these financial statements.
117
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Parent Company Financial Statements
For the year-ended 31 December 2021
1. ACCOUNTING POLICIES
Basis of Preparation
The annual financial statements of United Oil & Gas PLC (the Parent Company financial statements) have been prepared in accordance
with Financial Reporting Standard 100 Application of Financial Reporting Requirements ('FRS 100') and Financial Reporting Standard 101
Reduced Disclosure Framework ('FRS 101').
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore,
these financial statements do not include:
• certain disclosures regarding the company's capital;
• a statement of cash flows;
•
the effect of future accounting standards not yet adopted;
•
the disclosure of the remuneration of key management personnel; and
• disclosure of related party transactions with the Company’s wholly owned subsidiaries.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures are included
in the Company’s Consolidated Financial Statements. These financial statements do not include certain disclosures in respect of:
• Financial instruments (other than certain disclosures required as a result of recording financial instruments at fair value)
• Fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value)
• Related party transactions
• Share-based payments
As permitted by section 408 of Companies Act 2006, a separate Income Statement for the Company has not been included in these
financial statements. The Company’s loss for the year ended 31 December 2021 was £3,493,499 (2020: £519,134).
Going Concern
United regularly monitors its business activities, financial position, cash flows and liquidity through detailed forecasts. Scenarios and
sensitivities are also regularly presented to the Board, including changes in commodity prices and in production levels from the existing
assets, plus other factors which could affect the Group’s future performance and position. A base case forecast has been considered
which uses budgeted commitments and prevailing forward curve assumptions for oil prices. The key assumptions and related sensitivities
include a “Reasonable Worst Case” ('RWC') sensitivity where the Board has considered a scenario with significant aggregated downside,
including a reduction in forecast production rates of 15%, a reduction in oil prices by 20% and an increase in forecast capital expenditure in
Egypt by 10%.
118
United Oil & Gas PLC Both the base case and RWC take into consideration the Crown Milestone Settlement Agreement for $2.5m and the completion of the
Italian divestment for €2.2m in early 2022. The likelihood of all these downside sensitivities taking place simultaneously and lasting for the
entire forecast period is considered to be remote. Under such a RWC scenario, we have identified appropriate mitigating actions, including
the deferral of additional uncommitted capital expenditure, further divestment of the portfolio, restructuring of debt arrangements and
adjustment of the Group cost base, which would be available to us and have been demonstrated as effective strategies in previous periods
of low oil prices. Our business in Egypt remains robust given cash operating costs of less than $6/boe, flexible drilling contracts, downside
price protection on our hedged volumes and gas contracts that are fixed price in nature. There are limited capital commitments in the
other assets in our portfolio. The forecasts outlined above show that the Group will have sufficient financial headroom for the 12 months
from the date of approval of the 2021 Accounts. Based on this analysis, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to use the going concern basis
of accounting in preparing the annual Financial Statements.
Investments
Fixed asset investments are stated at cost. Investments are tested for impairment when circumstances indicate that the carrying value
may be impaired.
Impairment of Non-financial Assets
At each balance sheet date, the Directors review the carrying amounts of the Company’s tangible and intangible assets, other than
goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not
generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit
to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the
asset or cash-generating unit is reduced to its recoverable amount. If the recoverable amount of a cash-generating unit is less than its
carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset or cash-generating unit in prior periods. A reversal of an impairment
loss is recognised in the Income Statement immediately.
119
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Parent Company Financial Statements
For the year-ended 31 December 2021
Financial Instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial
instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset
and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in
accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets are classified into the following categories:
• amortised cost
•
fair value through profit or loss ('FVTPL')
•
fair value through other comprehensive income ('FVOCI').
In the periods presented the Company does not have any financial assets categorised as FVOCI or FVTPL.
The classification is determined by both:
•
the entity’s business model for managing the financial asset
•
the contractual cash flow characteristics of the financial asset.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions:
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
•
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal
amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Company’s cash and cash equivalents, trade and other receivables fall into this category of financial instruments.
Impairment of Financial Assets
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model to be applied. The expected credit loss
model requires the Company to account for expected credit losses and changes in those expected credit losses at each reporting date to
reflect changes in credit risk since initial recognition of the financial assets.
IFRS 9 requires the Company to recognise a loss allowance for expected credit losses on trade receivables
In particular, IFRS 9 requires the Company to measure the loss allowance for a financial instrument at an amount equal to the lifetime
expected credit losses ('ECL') if the credit risk on that financial instrument has increased significantly since initial recognition, or if the
financial instrument is a purchased or originated credit-impaired financial asset. However, if the credit risk on a financial instrument has
not increased significantly since initial recognition, the Company is required to measure the loss allowance for that financial instrument at
an amount equal to 12 months ECL.
120
United Oil & Gas PLC Classification and measurement of financial liabilities
The Company’s financial liabilities include trade and other payables, borrowings and derivatives.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Company
designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within
finance costs or finance income.
Embedded derivative financial instruments
A borrowing arrangement structured as a prepaid commodity swap with monthly repayments over 30 months has embedded in it a
derivative that is indexed to the price of the commodity. This is considered to be a separable embedded derivative of a loan instrument.
At the date of issue, the fair value of the embedded derivative is estimated by considering the derivative as a series of forward contracts
with modelling of the fixed and floating legs to determine a repayment schedule and derive a net present value for the forward contract
embedded derivative.
This amount is recognised separately as a financial liability or financial asset and measured at fair value through the income statement.
The residual amount of the loan is then recorded as a liability on an amortised cost basis using the effective interest method until
extinguished upon conversion or at the instrument’s maturity date.
Current Taxation
Current taxation is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the balance sheet
date and includes adjustments to tax payable or recoverable in respect of previous periods.
Deferred Taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements. However, if the deferred tax arises from the 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 or loss,
it is not accounted for. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance
sheet date and are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.
Deferred tax liabilities are provided in full.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss, except where they relate to
items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable
entity or different taxable entities where there is an intention to settle the balances on a net basis.
Foreign Currency
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated at the rate of exchange ruling at the year-end date. All differences are taken to the Income Statement.
121
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Parent Company Financial Statements
For the year-ended 31 December 2021
Share-based Payments
Where share-based payments (warrants and options) have been issued, IFRS 2 has been applied whereby the fair value of the share-based
payment is measured at the grant date and spread over the vesting period. A valuation model is used to assess the fair value, taking into
account the terms and conditions attached to the share-based payments. The fair value at grant date is determined including the effect of
market based vesting conditions, to the extent such vesting conditions have a material impact.
The cost of equity¬-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award
('the vesting date').
The cumulative expense recognised for equity¬-settled transactions at each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.
The charge or credit for a period to the income statement represents the movement in cumulative expense recognised as at the beginning
and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition,
which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/
or service conditions are satisfied. Where the terms of an equity-¬settled award are modified, the minimum expense recognised is the
expense as if the terms had not been modified. An additional expense is recognised for any modification, which increases the total fair
value of the share-¬based payment arrangement or is otherwise beneficial to the recipient as measured at the date of modification.
Where an equity-¬settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement
award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as
described in the previous paragraph.
Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is credited to the income statement.
Equity
Equity comprises the following:
•
“Share capital” represents amounts subscribed for shares at nominal value.
•
“Share premium” represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
•
“Share-based payment reserve” represents amounts credited to equity as part of the accounting for share-based payments.
•
“Retained losses” represents the accumulated profits and losses attributable to equity shareholders.
122
United Oil & Gas PLC 2. INVESTMENTS
Cost
As at 1 January 2020
Additions
As at 31 December 2020
Additions
As at 31 December 2021
Investments in
Subsidiaries
£
1,554,810
14,572,271
16,127,081
-
16,127,081
The Company’s subsidiaries are detailed in note 9 to the consolidated financial statements, which details the acquisition of UOG Egypt Pty
Limited that gave rise to the increase in investments in the prior year.
3. TRADE AND OTHER RECEIVABLES
Amounts due from group undertakings
Crown disposal proceeds due
Other tax receivables
4. CASH AND CASH EQUIVALENTS
Cash at bank
5. TRADE AND OTHER PAYABLES
Trade payables
Amounts due to group undertakings
Other payables
Accruals
2021
£
6,746,321
1,853,000
44,890
2020
£
5,694,313
2,098,740
15,400
8,644,211
7,808,453
2021
£
36,115
2020
£
105,907
2021
£
2020
£
573,455
402,588
7,857,793
2,499,717
489,259
50,000
486,090
47,500
8,970,507
3,435,895
123
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Notes to the Parent Company Financial Statements
For the year-ended 31 December 2021
6. DEFERRED SHARES
On 12 October 2015, the Company issued 30,000 Deferred Shares of £1 for £30,000 to the founder, which have an entitlement to a non-
cumulative annual dividend at a fixed rate of 0.1 per cent of their nominal value. The Deferred Shares have no voting rights attached to
them and may be redeemed in their entirety by the Company for an aggregate redemption payment of £1.
7. BORROWINGS AND DERIVATIVES
Secured – at amortised cost
Other loans
Current
Non-current
Separated embedded derivative
Loan derivative liability (current)
Loan derivative liability (non-current)
Other derivative financial instruments
Hedge derivative liability (current)
Details of borrowings and derivatives are given in note 22 of the group financial statements.
2021
£
2020
£
1,795,295
1,795,295
-
1,795,295
2021
£
997,661
-
3,354,892
1,571,224
1,783,668
3,354,892
2020
£
666,222
476,728
997,661
1,142,950
-
64,788
124
United Oil & Gas PLC 8. SHARE CAPITAL
Allotted, issued, and fully paid:
Ordinary shares of £0.01 each
At 1 January 2021
Allotments:
Shares issued for cash (exercise of options)
At 31 December 2021
At 1 January 2020
Allotments:
Date of
issue
Number
Share
capital
£
Share
premium
£
625,153,969
6,251,540
12,288,252
19,650,000
196,500
118,500
644,803,969
6,448,040
12,406,752
345,613,985
3,456,140
7,486,946
Shares issued in consideration for business combination
28-Feb-20
114,503,817
1,590,362
3,196,628
Shares issued for cash
28-Feb-20
159,036,167
1,145,038
1,923,664
Shares issued for cash (exercise of warrants)
05-Aug-20
6,000,000
60,000
90,000
Share issue expenses
At 31 December 2020
-
-
(408,986)
625,153,969
6,251,540
12,288,252
The Company has one class of ordinary shares which carry no fixed right to income.
9. EVENTS AFTER THE BALANCE SHEET DATE
See note 30 of the Notes to the Consolidated Financial Statements.
125
2021 Annual Report and Financial Statements Strategic ReportGovernance ReportFinancial ReportAppendices Company Information
Directors
Company Secretary
Registered Number
Registered Office
Nominated Advisor
Independent Auditors
Joint Broker
Legal Advisers
Principal Bankers
Registrars
126
Graham Martin (Chair)
Brian Larkin
David Quirke
Jonathan Leather
Iman Hill
Tom Hickey
David Quirke
09624969
200 Strand
London
WC2R 1DJ
Beaumont Cornish Ltd
Building 3
566 Chiswick High Road
London
W4 5YA
UHY Hacker Young LLP
Chartered Accountants & Registered Auditors
Quadrant House
4 Thomas More Square
London
E1W 1YW
Tennyson Securities
65 Petty France
London
SW1H 9EU
Optiva Securities Ltd
2 Mill Street
London
W1S 2AT
Armstrong Teasdale LLP
200 Strand
London
WC2R 1DJ
Bank of Ireland
Raheny
Dublin 5
Barclays Bank plc
1 Churchill Place
London
E14 5HP
Share Registrars Limited
3 Millennium Centre
Crosby Way
Farnham
Surrey
GU9 7XX
United Oil & Gas PLC Glossary
Bbl
/Bbl
Bn
bopd
Capex
EGPC
ESG
ESP
Barrels
Per barrel
Billion
Barrels of oil per day
Capital Expenditure
MMBbl
Million barrels
MMboe
Million barrels of oil equivalent
MSET
Ministry for Science, Energy and Technology
NPV
OGA
Net present value
Oil and Gas Authority
Egyptian General Petroleum Corporation
OPEX
Operating expenditure
Environment, Social, Governance
Electrical Submersible Pumps
HCIIP
Hydrocarbon initially in place
HSE
JOC
JV
km
km2
Health, safety and environment
Joint Operating Company
Joint Venture
Kilometres
Square kilometres
KPI(s)
Key performance indicator(s)
m
M
Metres
Thousand
MBbl
Thousand barrels
Mbopd
Thousands of barrels of oil per day
MM
Million
Q1
Q2
Q3
Q4
scf
SPA
TD
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Standard cubic feet
Sales and Purchase Agreement
Total Depth
UK CNS
UK Central North Sea
WI
%
2C
2D
3D
2P
Working interest
Percentage
Best estimate of contingent resources
Two-dimensional
Three-dimensional
Proved plus probable reserves
DESIGNED AND PRODUCED BY:
2021 Annual Report and Financial Statements
127
Strategic ReportGovernance ReportFinancial ReportAppendices United Oil & Gas
Dublin Office
128 Lower Baggot Street
Dublin
D02 A430
Ireland
London Office
200 Strand
London
WC2R 1DJ
United Kingdom
Tel: +44 (0)20 7539 7272
info@uogplc.com
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