Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
ZENITH ENERGY LTD.
ANNUAL REPORT AND FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2024
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
2
CONTENTS
3
COMPANY INFORMATION
4
CHAIRMAN’S STATEMENT
8
CEO STATEMENT
12
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
14
DIRECTORS' REPORT
24
GOVERNANCE REPORT
30
INDEPENDENT AUDITOR’S REPORT
35
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
36
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
37
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
38
CONSOLIDATED STATEMENTS OF CASH FLOWS
39
NOTES TO THE FINANCIAL STATEMENTS
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
3
COMPANY INFORMATION
Directors
Dr. Jose Ramon Lopez-Portillo (Chairman and Non-Executive Director)
Andrea Cattaneo (Chief Executive Officer & President, Executive Director)
Luca Benedetto (Chief Financial Officer & Executive Director)
Dario Ezio Sodero (Non-Executive Director)
Sergey Borovskiy (Non-Executive Director)
Registered Office
Suite 2400, 745 Thurlow Street, Vancouver BC V6E 0C5, Canada
Head Office
Suite 4000, 421 - 7th Avenue SW, Calgary, T2P 4K9, Alberta, Canada
Telephone Number: +1 (587) 315 9031
Registered Corporation Number
BC0803216
Website
www.zenithenergy.ca
Independent Auditor
RPG Crouch Chapman LLP
40 Gracechurch Street
London, EC3V 0BT, United Kingdom
Principal Bankers
Barclays Bank PLC
1 Churchill Place
Canary Wharf
London, E14 5HP, United Kingdom
Competent Person
Chapman Petroleum Engineering Ltd
1122 4th Street S.W., Suite 700
Calgary Alberta T2R 1M1, Canada
Depositary and Registrar
Computershare Trust Company of Canada
100 University Avenue, 8th Floor
Toronto, ON M5J 2Y1, Canada
Computershare Investor Services Plc
The Pavilions Bridgwater Road
Bristol, BS99 6ZZ, United Kingdom
DNB Bank ASA
Dronning Eufemias Gate 30,
0191 Oslo, Norway
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
4
CHAIRMAN’S STATEMENT
In the 2024 financial the Group has continued to implement our business development strategy by directing
our primary focus towards acquiring assets in the USA. In the USA, the Company has acquired a controlling
interest in Cyber Apps World Inc (now Leopard Energy, Inc.)., an entity listed on the Pink Open Market segment
of US OTC Markets under the ticker “CYAP”. In this light, on January 16, 2024, the Company announced that
it had successfully bid at auction for a 5% royalty interest in a package of seven (7) producing wells located in
the Eagle Ford Shale, Lavaca County, Texas.
This represents our first transaction in the US energy production and development sector and is, for CYAP, a
shift away from software development towards identifying and acquiring opportunities in the US energy and
production development sector, and confirmed that further acquisitions of this kind, specifically royalties in
non-operated oil and gas production leases, are planned.
We have also taken decisive steps by discontinuing the Group’s involvement in potential acquisitions that were
no longer attractive, specifically in the Republic of Kazakhstan, the Republic of Benin, the Republic of Yemen,
and the Republic of Congo.
As of the date of this document the Group operates in Italy, where it produces natural gas, electricity and
condensate, and the United States, where it produces oil.
During the period, the Company has initiated three separate arbitrations against the Republic of Tunisia and/or
ETAP, the national oil company of the Republic of Tunisia for a total cumulative claimed amount of at least
US$140.5 million.
By way of summary, an ICC (International Chamber of Commerce) arbitration has been initiated against ETAP
for an amount of US$6.5 million due to its failure to comply with its contractual obligations to pay for oil
produced and sold by one of the Company's subsidiaries, a second ICC arbitration has been launched by
another fully owned subsidiary of the Company against the Republic of Tunisia for its arbitrary failure to
lawfully recognize the acquisition of its interest in the North Kairouan permit and the Sidi El Kilani Concession
in Tunisia, and a third arbitration has been submitted in the International Centre for Settlement of Investment
Disputes following various breaches of bilateral trade agreements committed by the Republic of Tunisia to the
severe detriment of the Company’s interests in Tunisia (collectively, the “Arbitrations”).
We are pleased to report that notable results have already been achieved in respect of the Arbitrations. For
example, on July 10, 2023, the Company announced that it had obtained a 'conservative seizure' for an amount
equivalent to approximately US$6.5 million deposited in a bank account in Switzerland under the name of
ETAP. Further, on November 29, 2023, the Company announced that the ICC (International Chamber of
Commerce) appointed Arbitral Tribunal for the arbitration claims launched against ETAP had rejected ETAP's
request to include the Tunisian State as co-defendant and ordered ETAP to pay approximately EUR 120,000 in
costs. These are positive developments that showcase the merits of our procedural conduct.
In addition, on October 25, 2023, the Company announced that the Company's common shares of no par value
would commence dealing on the OTCQB Venture Market cross-trading facility in the United States (the
"OTCQB") with effect from that date. The OTCQB ticker for the Common Shares is "ZENAF". Zenith will
continue to rely on the announcements and disclosures it makes to the London Stock Exchange and will have
no Sarbanes-Oxley or SEC reporting requirements.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
5
On August 29, 2023, the Company announced that it had acquired control of Cyber Apps World Inc. (now
Leopard Energy, Inc.) ("CYAP") by way of a Securities Purchase Agreement ("SPA") signed with Janbella Group
LLC ("Seller") for a purchase price of US$398,319.97 in cash
On September 29, 2023, the Company announced that BCRA Credit Rating Agency AD ("BCRA") had confirmed
the Company's long-term issuer credit rating of "B+ with Stable Outlook".
On October 10, 2023, the Company announced that EuroRating Sp. Zo.o ("Eurorating") has assigned the
Company a long-term debt issuer credit rating of "B+ with Stable Outlook".
On July 10, 2023, the Company announced that it had successfully obtained a "conservative seizure" for an
amount equivalent to approximately US$6.5 million deposited in a bank account under the name of ETAP
Entreprise Tunisienne d'Activités Pétrolières, the national oil company of the Republic of Tunisia.
The Conservative Seizure was granted in view of ETAP's failure to comply with its contractual obligations
and pay for oil produced and sold by one of the Company's subsidiaries.
The ICC Arbitration has been commenced by the Company following the Conservative Seizure.
Zenith had first announced the submission of a request for arbitration against the Republic of
Tunisia before the International Centre for Settlement of Investment Disputes in Washington DC ("ICSID
Arbitration") on June 7, 2023.
The request for damages in the ICSID Arbitration, following various breaches of bilateral trades
agreements made by the Republic of Tunisia to the detriment of Zenith and its subsidiaries, is for a total
cumulative claimed amount of at least US$48 million.
The ICSID Arbitration and the ICC Arbitration are two separate arbitration proceedings.
On November 29, 2023, the Company announced that the ICC (International Chamber of Commerce)
appointed Arbitral Tribunal for the arbitration claims launched against Entreprise Tunisienne d'Activités
Pétrolières ("ETAP"), the national oil company of the Republic of Tunisia (the "ICC Arbitration"), had rejected
ETAP's request to include the Tunisian State as co-defendant and ordered ETAP to pay approximately EUR
120,000 in costs.
Zenith Energy will seek to enforce the decision with a view to receiving payment directly to the claimant, a
fully owned subsidiary of the Company, named Ecumed Petroleum Zarzis Ltd ("EPZ"), registered in Barbados.
On January 16, 2024, the Company announced that its subsidiary CYAP Oil, LLC, had successfully bid at auction
for a 5% royalty interest in a package of seven (7) producing wells located in the Eagle Ford Shale, Lavaca
County, Texas.
This represents CYAP's first transaction in the US energy production and development sector and is, in line
with Zenith's strategy for CYAP, a shift away from software development towards identifying and acquiring
opportunities in the US energy and production development sector.
CYAP has confirmed that further acquisitions of this kind, specifically royalties in non-operated oil and gas
production leases, are planned.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
6
Production activities
During the financial year ended March 31, 2024, the Group:
a)
The Group generated revenues from oil and natural gas of CAD$ 1,788k (2023 – CAD$ 13,159k)
b)
As of March 31, 2024, inventory consists of CAD$ 2,031k (2023 – 6,448k) related to 9,899 barrels
of crude oil that has been produced but not yet sold in Tunisia.
c)
The Company sold 159,119 mcf of natural gas from its Italian assets, as compared to 177,246 mcf
of natural gas in the 2023 similar period.
Financing
The Company issued equity and financing instruments during the course of the financial year ended March
31, 2024, raising a combined net total of CAD$15.8m (March 31, 2023 - CAD$19.1m) to finance the Group’s
development strategies.
On September 20, 2023, the Company announced that it would proceed with the implementation of the
share consolidation approved by shareholders at the Company's annual general meeting held on April 14,
2023 (the "Consolidation"). Under the Consolidation, one new common share of no par value ("New
Common Shares") was issued for every ten existing common shares of no par value ("Old Common Shares").
During the year, 40,515,164 new common shares were issued (March 31, 2023 – 43,772,809), as detailed in
the financial statements (note 16).
To fund the acquisition of assets, and their development, to avoid an excessive dilution of its share capital
the Company issued unsecured, multi-currency (GBP, Euro, CHF and USD) Medium Term Notes at par value
(the "Notes"), admitted to trading on the Third Market (MTF) of the Vienna Stock Exchange ("Wiener Borse
AG") and bearing interest payable semi-annually.
As of March 31, 2024, the Company sold Notes for an aggregate total amount of CAD$ 28,085,723, net of
Note expired and repaid in January 2024 for CAD$ 41,624 (March 31, 2023, comparative aggregate amount
CAD$ 25,246,994),as follows:
EMTN (Bond)
Currency
CAD$ equivalent
EMTN (Bond) EURO
CAD$
6.862.218
EMTN (Bond) GBP
CAD$
5.304.705
EMTN (Bond) USD
CAD$
15.918.800
TOTAL
28.085.723
During the Financial Year, the Company announced that BCRA Credit Rating Agency AD ("BCRA") and
EuroRating Sp. Zo.o ("Eurorating") have assigned the Company a long-term debt issuer credit rating of "B+
with Stable Outlook"
Financial Results
The Group recorded an after-tax loss of CAD$42,367k for the year ended March 31, 2024, compared to an
after-tax loss of CAD$12,827k for the year ended March 31, 2023. This result was negatively impacted by the
non-recurrent administrative expenses related to the negotiation for the acquisitions, the cost for the
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
7
arbitration and non-cash items.
The group production costs for the year were CAD$ 1,085k (2023 - CAD$5,750k).
Finance expense for the year was CAD$ 5,410k (2023 - CAD$3,161k).
Cash balances of CAD$ 207k (2023 - CAD$1,442k) were held at the end of the financial year.
Total equity attributable to the ordinary shareholders of the Group was CAD$ 49,978k as of March 31, 2024,
(2023 - CAD$91,652k).
Dr. José Ramón López-Portillo
Non- Executive Chairman
July 29, 2024
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
8
CEO STATEMENT
Dear Shareholders,
The 2024 financial year (“2024 FY”) has been a year of transition for Zenith Energy (“Zenith” or the “Company”)
in several key areas.
Zenith has announced the commencement of international arbitration proceedings against the Republic of
Tunisia and/or ETAP, the national oil company of the Republic of Tunisia, for various breaches of international
bilateral trade agreements subscribed by the Republic of Tunisia, the arbitrary termination of certain licenses
held by the Company in Tunisia, as well as the non-payment of oil produced by the Company’s subsidiaries in
Tunisia (collectively the “Arbitrations”).
Summary of Arbitrations
ICC Arbitration against ETAP - ("ICC Arbitration 1")
As last announced on November 1, 2023, Ecumed Petroleum Zarzis Ltd ("EPZ"), a fully owned subsidiary of
Zenith registered in Barbados, initiated International Chamber of Commerce (ICC) Arbitration proceedings,
seated in Paris, against Entreprise Tunisienne d'Activités Pétrolières ("ETAP"), the national oil company of
the Republic of Tunisia.
ICC Arbitration 1 was commenced following ETAP's failure to comply with its contractual obligations by not
paying for oil produced and sold by EPZ in Tunisia.
On November 29, 2023, the Company announced that the Arbitral Tribunal had rejected ETAP's request to
include the Republic of Tunisia as co-defendant and ordered ETAP to pay approximately EUR 120,000 in costs.
The ICC Arbitration 1 claim is in the amount of approximately US$7.5 million including accrued interest
resulting from late payment.
The Arbitral Tribunal for ICC Arbitration 1 is expected to convene during the month of April 2024. A decision,
resulting in a potential award favourable to EPZ, is expected to be made by the close of 2024.
ICC Arbitration for SLK against the Republic of Tunisia - ("CNAOG ICC Arbitration")
As last announced on December 6, 2023, Zenith's fully owned company, Canadian North Africa Oil and Gas
Limited ("CNAOG") initiated ICC (International Chamber of Commerce) Arbitration proceedings, seated
in Geneva, against the Republic of Tunisia.
Zenith has presented a claim for damages in the amount of US$85.8 million in connection with the CNAOG ICC
Arbitration.
The claimed amount was determined by a third-party expert consultant in consideration of the following:
•
CNAOG's lost production revenue and associated profitability, during a period of high energy
prices, from the SLK Concession until its initial expiry in December 2022.
•
The volume of crude oil produced from the SLK Concession and allocated to and received
by CNAOG upon the completion of the acquisition.
•
Unpaid invoices for oil production by ETAP, the national oil company of Tunisia.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
9
•
The value of the 45% interest in the renewal of the SLK Concession, representing a breach of
CNAOG's right to renew its previously existing 22.5% interest in SLK, as well as the 22.5%
interest held by Kuwait Foreign Petroleum Exploration Company K.S.C.C's subsidiary, which
relinquished its interest in the SLK Concession before its initial expiry.
A decision, resulting in a possible award favourable to CNAOG, is expected to be made during the first quarter
of 2025.
ICSID Arbitration against the Republic of Tunisia - ("ICSID Arbitration")
As announced on June 7, 2023, Zenith's fully owned subsidiaries (the "Investors") submitted a request for
Arbitration before the International Centre for Settlement of Investment Disputes in Washington DC with a
total cumulative claimed amount of at least US$48 million.
The ICSID Arbitration was launched following a series of actions undertaken by the Republic of Tunisia to the
material detriment of the Investors including, inter alia, unreasonable and arbitrary obstructions in relation,
primarily, to the development of the Sidi El Kilani and Ezzaouia concessions.
Following certain additional breaches committed by the Republic of Tunisia to the material detriment of the
Investors since the commencement of the ICSID Arbitration, the Investors are, in consultation with expert
third-party consultants, determining a revised increased claimed amount to be submitted.
The Investors were informed on March 18, 2024, that Anima Dispute Resolution, an international law firm
dedicated to international arbitrations appointed by the Republic of Tunisia as specialist counsel, had resigned
with immediate effect.
The ICSID Arbitration is expected to conclude during 2027.
Italian Energy Production Portfolio
Zenith’s Italian energy production portfolio, involving the generation of electricity using low-grade natural gas,
has in recent years recorded unprecedented levels of profitability. Due to a decline in international gas and
electricity prices, revenue generation has been reduced to CAD$ 1,611k.
However, it is important to underline that, notwithstanding the decline in international energy prices,
profitability has remained robust and continued effort are being made to optimise the portfolio, as evidenced
by the acquisition of additional stake in Sant'Andrea natural gas production concession announced to the
market in March 2024.
USA
The Company has acquired majority control of Cyber Apps World Inc. ("CYAP") by way of a Securities Purchase
Agreement ("SPA"). CYAP has since been renamed Leopard Energy Inc. (“Leopard”) to reflect the new strategic
direction of the company, specifically the acquisition of energy production and development opportunities in
the United States of America.
On January 16, 2024, CYAP announced that its subsidiary, CYAP Oil, LLC, had successfully bid at auction for a
5% royalty interest in a package of seven (7) producing wells located in the Eagle Ford Shale, Lavaca County,
Texas.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
10
This represents CYAP's first transaction in the US energy production and development sector and is, in line
with Zenith's strategy for CYAP, a shift away from software development towards identifying and acquiring
opportunities in the US energy and production development sector.
Claim against SMP Energies
I am pleased to confirm that the legal claim launched by Zenith’s fully owned subsidiary in the Republic of the
Congo, Anglo African Oil & Gas Congo S.A.U ("AAOGC"), is progressing in the Paris Commercial Court. During
the 2023 FY we announced that the Company had increased the claimed amount for performance failures by
SMP during drilling activities to US$9 million, in consideration of the significant commercial damages
suffered by AAOGC, specifically the impossibility to begin production activities, as a direct result.
On July 3, 2023, the Company announced by way of regulatory news the Court's rejection of SMP's request for
a stay of proceedings in France, stating that SMP's request contained "all the characteristics of a dilatory
request" and ordered SMP to pay an amount of EUR 30,000 to AAOGC as compensatory damages for its abusive
procedural behaviour (the "Damages Payment"). The Court's decision was immediately enforceable.
SMP subsequently failed to comply with the Court's Order by refusing to voluntarily pay the Damages Payment.
As a result, the Company has enforced the Court's decision and performed a seizure in the amount of the
Damages Payment on a bank account of SMP in France.
SNPC Debt
AAOGC is also owed an amount of approximately US$5.3 plus accrued interest by Société Nationale des
Pétroles du Congo ("SNPC"), the national oil company of the Republic of Congo Brazzaville. This amount
remains outstanding, and the Company has engaged legal representatives who will be taking the necessary
actions to fully recover this amount.
Conclusion
As a management team, we proactively seek opportunities to build a balanced portfolio which creates
shareholder value. Our strategic focus is to pursue energy production opportunities through the acquisition of
proven revenue generating oil, gas and electricity production assets, as well as low-risk exploration activities
in assets with existing production.
As always, I am grateful to our shareholders for their support and continued belief in the Company’s
development activities.
The very significant damage the Company, as well as local employees, have suffered because of the actions of
the Tunisian Ministry of Hydrocarbons cannot be overstated.
One of the primary results of these unjustified actions has been to deprive the Company of the value it had
created by way of the acquisitions commenced in 2021, when oil prices had been severely impacted by the
COVID-19 pandemic, and Zenith had invested significant financial resources in Tunisia in good faith with the
full support and knowledge of the Ministry of Hydrocarbons.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
11
The severe financial loss brought about by the arbitrary deprivation of the Company's interests, inter alia, in
the Sidi El Kilani and Ezzaouia concessions, during a period when oil prices have since rebounded and sustained
revenue generation to the benefit of the Company's subsidiaries would have been achieved, is an
incontrovertible fact.
The Arbitrations have the objective of redressing these breaches and fully compensating the Company for the
damages it has suffered.
Zenith is fully confident in the merits of the Arbitrations. We shall look to initiate a process to determine and
grant an extraordinary dividend to shareholders following a potential successful outcome resulting from
the CNAOG ICC Arbitration and ICSID Arbitration.
The Board and the management team have unchanged confidence in the Company’s ability to potentially
deliver transformational value to shareholders as it successfully delivers on its objectives.
Sincerely,
Andrea Cattaneo, Chief Executive Officer
July 24, 2024
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
12
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Directors
Dr. Jose Ramon Lopez-Portillo (Chairman and Non-Executive Director)
Mr. Lopez-Portillo has been managing Director and then Chairman of the Board since 24 September 2007. He
is an economist with a large network of business contacts worldwide, and who previously served as a Mexican
Permanent Representative in Rome, Italy. Mr. Lopez- Portillo is a leading researcher in the energy security of
Mexico and acts as Deputy Minister at Mexico’s Planning and Budget Secretariat. Mr. Lopez-Portillo holds a
Doctorate degree in Political Science and International Relations from the University of Oxford.
Andrea Cattaneo (Director, President and CEO)
Mr. Cattaneo has been a Director of the Company since 9 December 2008 and served as President and CEO
of the Group since 2009. He is an energy specialist with a focus on emerging countries and has 30 years’
experience in advising government in financial, industrial, and energy-related matters. Mr. Cattaneo has
strong expertise and experience in structuring and negotiating contracts in the international markets,
specifically the oil industry. He also has significant experience in former socialist countries, having arranged
the first US$ loan to Vietnam, the then third poorest country in the world at the time, towards the beginning
of his financial career in 1985. Mr. Cattaneo holds an undergraduate degree in Economics from the University
of Genoa and a postgraduate degree in Taxation Law from the University of Bologna. He is a former member
of the Business Advisory Council to the Great Tumen Initiative, a United Nations project for regional economic
cooperation in Northeast Asia. He is one of Zenith’s founders.
Luca Benedetto (Chief Financial Officer & Director)
Luca Benedetto is an Italian national, trained in Italy as a registered accountant with further education in IFRS
accounting and consolidation at IPSOA Milan. He has more than twenty five years of experience in accounting,
auditing, and financial administration. Mr. Benedetto began his professional career as an accountant and
computer programmer responsible for financial software development and worked for the Italian division of
IBM as an internal auditor and accountant as well as providing staff training in these aforementioned fields.
He also served for seven years as a financial and administrative officer in a well-established Italian company
specialising in the construction of fuel and water storage tanks.
He joined the Zenith Energy Ltd. group in 2013 as Chief Financial Officer of the Group's Italian subsidiary,
Canoel Italia S.r.l., and has since progressed to also hold the position of Group Financial Controller. In this
capacity he has been directly involved in the monitoring of business performance, cash flow management,
budgetary oversight, accounts team supervision, accounts preparation and strategic planning. Since January
2016 he has also been responsible for the compiling and reviewing of the quarterly Consolidated Financial
Statements and Management's Discussion and Analysis of the Group.
Dario Ezio Sodero (Non-Executive Director and Chairman of the Audit Committee)
Mr. Sodero was appointed to the Board on 24 June 2009. As an experienced energy industry executive with
47 years of experience in North America, the Sub-Arctic, North Africa and the Middle East, Mr. Sodero has
strong geological, exploration and technical expertise. Mr. Sodero has formerly acted as director and
executive of several other TSX- and TSXV-listed exploration and production companies. Mr. Sodero holds a
Doctorate degree in Geology from the University of Turin, Italy.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
13
Sergey Borovskiy (Non-Executive Director)
Sergey is an accomplished executive with a track record in investment banking, M&A projects, cross-border
transactions. Sergey offers over 30 years of China and Hong Kong experience in founding and developing
companies in a multilingual and multicultural environment. He is fluent in Russian, English and Mandarin.
Sergey studied in both China and Russia, he has a degree in Economics and an Executive MBA.
He has served as Non-Executive Director of Zenith Energy since 2017. He has also held, or currently holds, the
following roles:
•
Since 1993 Chairman of SCHI Group, International trading, investment and manufacturing holding.
•
Since 2002 Board Member of National Agency for Direct Investment (NAPI).
•
During 2017 – 2019, he was CEO of Sanju Environmental Protection (Hong Kong) Limited, overseeing
all international projects of Sanju Group.
•
2017 - 2018 Executive Director at Jutal Offshore Oil Services (public HK company).
•
Since 2020 VP of Kaisun Holdings (public HK investment holding).
•
Since 2021 Head of ITI Capital Asia, an international investment company offering a variety of
investment services, capital market opportunities, including pre-IPO investment and complex financial
products.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
14
DIRECTORS' REPORT
The Directors present their Annual Report and Financial Statements of the Group for the year ended March
31, 2024.
In addition to what was fully disclosed in the Chairman Statement, on February 13, 2024, the Company
announced that it had completed private placement in the United Kingdom (the "UK Financing"), and in
Norway (the "Norwegian Financing", collectively, the "Financings").
The Financings have attracted the participation of existing institutional investors, including Premier Miton
Investors, as well two Directors, Mr. Andrea Cattaneo and Mr. Luca Benedetto, respectively the Chief Executive
Officer and Chief Financial Officer of the Company, to raise an aggregate total amount of approximately
£1,260,000 (equivalent to approx. 16,814,000 NOK and US$1,590,000), resulting in the issuance of a total of
37,856,250 new common shares, plus 2,658,914 Debt Settlement Shares.
Issue Price
The Financings were completed at price of £0.03 (3 pence) for the UK Financing and NOK 0.42 for the
Norwegian Financing, representing a premium in respect of the closing price of the Company's equity securities
on both the London Stock Exchange and Euronext Growth Oslo on February 12, 2024.
Norwegian Financing
Zenith has issued a total of 29,556,250 common shares of no-par value in the capital of the Company in
connection with the Norwegian Financing (the "Norwegian Financing Common Shares") to raise gross proceeds
of 12,413,626 NOK (approximately £927,000 or CAD$ 1,596,000).
UK Financing
Zenith has issued a total of 8,300,000 common shares of no-par value in the capital of the Company in
connection with the UK Financing (the "UK Financing Common Shares") to raise gross proceeds of £249,000
(approximately 3,324,000 NOK or CAD$ 427,400).
Debt Settlement
The Company has allotted 2,658,914 Common Shares ("Debt Settlement Shares") to certain service providers
in lieu of cash settlement for services provided to Zenith for a total value of 1,116,400 NOK (approximately
£84,000). The Debt Settlement Shares will rank pari passu in all respects with the existing common shares of
the Company.
Financial review of activity for the period
The Group issued equity once during the financial year ended March 31, 2024, raising a combined net total
of CAD$2,137m (March 31, 2023 - CAD$3,966m) to finance the Group’s reconfigured development strategies.
During the year, 40,515,164 (March 31, 2023 – 43,738,088) new Ordinary Shares were issued, as detailed in
the financial statements (note 16) and as per the following table.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
15
Number of
Amount
Shares
CAD$’000
Balance – March 31, 2023
231,030,237
64,087
Unit private placement proceeds
37,856,250
1.999
Units issued in settlement of debt
2,658,914
142
Issue costs
-
(4)
Total for the year
40,515,164
2,137
Balance – March 31, 2023
271.545.401
64,087
Following the issue of the new Ordinary Shares, and subsequent Admissions occurred, the Company had
271,545,401 common shares in issue and admitted to trading on the Euronext Growth of the Oslo Stock
Exchange, of which 232,860,686 common shares in issue and admitted to trading on the Main Market of the
London Stock Exchange, as of the date of this document.
Furthermore, to fund the acquisition of assets, and their development, to avoid an excessive dilution of its
share capital the Company issued unsecured, multi-currency (GBP, Euro, CHF and USD) Medium Term Notes
at par value (the "Notes"), admitted to trading on the Third Market (MTF) of the Vienna Stock
Exchange ("Wiener Borse AG") and bearing interest payable semi-annually.
The issue of the Notes is aligned with the Group’s strategy of diversifying its financing towards non-equity
dilutive funding to support its successful development.
The Company has been using the EMTN Programme to finance its activities in the USA, Central Asia and Italy.
The Company chose the Vienna Stock Exchange as it was viewed as a highly accessible market in terms of
simplicity of process and listing costs.
During the year, the Company announced that it had fully paid the semi-annual interest in relation to the
Notes. The most recent interest payment in relation to the Notes is the third such payment, with previous
interest payments having taken place during the months of June and December 2019, 2020, 2021 and 2022
respectively.
The Group’s yearly profit was mostly impacted by the non-recurrent administrative expenses related to the
negotiation for the acquisitions.
The Group production costs for the year were CAD$1,085k, compared to CAD$5,750k in 2023 and the General
and Administrative costs for the year were CAD$24,401k, compared to CAD $8,596k in 2023.
Cash flow
Cash used in investing activities totalled CAD$593k, (2023 - CAD$430k). The cash from financing activities in
2024 totalled CAD$3,548k, (2023 - CAD$16,563k), due to the share placings, issue of convertible loans and issue
of bonds.
Closing cash
As of March 31, 2024, the Group held CAD$207k, in cash (2023 - CAD$1,442k).
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
16
Position of Group’s business at the year end
At the year end the Group's Statement of Financial Position shows current assets totaling CAD$5,018k, (2023
– CAD$34,566k) and non-current assets totaling CAD$135,000k (2023 – CAD$228,345k).
Business strategy
As of the date of this report the Company’s primary activity is that of being an international oil and gas
production, development and exploration business.
The Company has a portfolio of oil and gas assets in Italy, Africa and USA. The Group’s principal assets are held
through:
(i)
its wholly owned subsidiary, Compagnie Du Desert Ltd (“CDD”), which holds a 100% interest in the
El Bibane and Robbana concessions in Tunisia;
(ii)
Canoel Italia S.r.l. (in which the Company has a 98.64% shareholding), which holds various working
interests in 13 onshore exploration and production properties in Italy; and
(iii)
Leopard Energy (previously known as CYAP) (in which the Company has a 99.87% shareholding).
The Company is seeking to acquire further oil and gas assets in Asia, the United Stated and other areas to
complement its existing assets in Italy.
The Company’s strategy is, among other things, to (i) grow through international acquisitions; (ii) increase the
production and reserves from its international inventory of oil and gas assets; (iii) target its operations towards
areas with advantageous access points for its exploration activities with a reasonably stable economic and
business environment; (iv) develop a balanced portfolio of short, medium and long-term opportunities; (v)
seek innovative ways to unlock value; (vi) achieve and maintain a robust, well-funded business with the
financial flexibility to fund high-impact exploration, appraisal and development programmes; and (vii) unlock
oil and gas reserves still unexploited in old and marginal oil and gas fields through the use of new technology.
Principal risks and uncertainties
The Group operates in an uncertain environment and is subject to a number of risk factors. The Directors
consider the following risk factors are of particular relevance to the Group's activities and to any investment
in the Group. It should be noted that the list is not exhaustive and that other risk factors not presently known
or currently deemed immaterial may apply. The risk factors are summarized below:
The impact of global oil prices on the Company
Demand for oil and gas is closely related to the health of the world economy while supply is determined more
by political matters. The price of oil and gas is set at a global level with small variances for local conditions.
Zenith is a very small producer and the price it receives for the oil and gas it produces is determined by global
supply and demand factors beyond its control.
Oil and gas prices depend on numerous factors over which the Group does not have any control, including
global supply, international economic trends, currency exchange fluctuations, inflation, consumption patterns
and global or regional political events.
The Group’s financial performance may therefore be substantially impacted both positively and negatively by
factors. Changes in global prices for oil and gas may result in the Group no longer being able to produce oil
and/or gas on a profitable basis. Historically, international crude oil and natural gas prices have fluctuated
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
17
widely. A material decline in the price of crude oil or natural gas would have a material adverse effect on the
Group’s financial results and reserves estimates.
Risks in connection with the war in Ukraine
The protraction of Russia’s military aggression of Ukraine commenced on February 2022 has made the outlook
for the medium term all the more uncertain and unpredictable.
Zenith is exposed to a major systemic risk that a prolonged conflict, an enlargement of military operations, the
impacts of the economic sanctions imposed by the international community against Russia. The possible
unilateral interruptions of hydrocarbons exports to Europe by Russia as retaliation could dampen investors or
consumers’ confidence, causing a delay or a halt in spending decisions.
Those developments could trigger a slowdown in the macroeconomic cycle, a stagnation or, under the worst
possible outcome, a global recession. Those could negatively and significantly affect demand for hydrocarbons,
which is very sensitive to macroeconomic trends, leading to a decline in hydrocarbon prices that are the main
driver of the Group’s results of operations and cash flow.
In response to Russia’s military aggression of Ukraine, the EU, the USA, and the UK have adopted economic
and financial sanctions designed to weaken Russia’s ability to fund the war operations.
The EU sixth sanction package of restrictive measures against Russia was enacted June 3, 2022, and is
particularly relevant to the Oil & Gas sector.
The new sanctions will phase out Russian oil imports to EU in an orderly fashion. For seaborne crude oil, spot
market transactions and execution of existing contracts will be permitted for six months after entry into force,
while for petroleum products, these will be permitted for eight months after entry into force. A waiver is
granted to certain EU Member States who have a particular pipeline dependency on Russia and can continue
to receive crude oil delivered by pipeline, until the Council decides otherwise. Finally, after a wind down period
of 6 months, EU operators will be prohibited from insuring and financing the transport, particularly through
maritime routes, of Russian oil to third countries.
The EU has also adopted the REPowerEU plan to end dependence on Russian fossil fuels as soon as possible
and well before 2030 by means of an articulated set of actions and instruments targeting the energy saving,
an acceleration in the green transition, a diversification of supplies and leaner procedures to sanction capital
investments.
Zenith has no direct or indirect engagement in the Russian upstream sector, being its production located in
different parts of the world, so the Group has no exposures towards Russia. In addition, Zenith is currently
taking into consideration new opportunities for development, investment, and expansion of its portfolio,
taking advantage of possible contingent market situations.
A substantial portion of the Group’s assets and operations outside of Europe are exposed to political and
economic risks, and future disruptions may have a material adverse effect on the Group’s business
A significant portion of the Group’s oil and gas assets and of the Group’s supply sources is located in countries
outside of the European Union – with developing economies or unstable political environments. As a result, a
significant portion of the Group’s revenue is derived from, or is dependent on, countries in which the Group’s
operations are exposed to economic and political risks, including expropriation and nationalization of property,
civil strife and acts of war or terrorism. In addition, in certain countries in which the Group is active, it may be
difficult to repatriate investment and profits. If it is perceived that the Group is not respecting or advancing the
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
18
economic and social progress of the communities in which it operates, its reputation and shareholder value
could be damaged. Any future disruptions may have a material adverse effect on the Group’s business, results
of operations and financial condition.
Activities in the oil and gas sectors can be dangerous, posing health, safety and environmental risks
Oil and natural gas exploration, development and production operations are subject to all the risks and hazards
typically associated with such operations, including hazards such as fire, explosion, blowouts, cratering, sour
gas releases and spills, each of which could result in substantial damage to oil and natural gas wells, production
facilities, other property as well as the environment or personal injury.
In particular, the Group may produce sour natural gas in certain areas. An unintentional leak of sour natural
gas could result in personal injury, loss of life or damage to property and may necessitate an evacuation of
populated areas, all of which could result in a liability to the Group.
In accordance with industry practice, the Group is not fully insured against all of these risks, nor are all such
risks insurable. Although the Group maintains liability insurance in an amount that it considers consistent with
industry practice, the nature of these risks is such that liabilities could exceed policy limits, in which event the
Group could incur significant costs. Oil and natural gas production operations are also subject to all the risks
typically associated with such operations, including encountering unexpected formations or pressures,
premature decline of reservoirs and the invasion of water into producing formations.
Losses resulting from the occurrence of any of these risks may have a material adverse effect on the Group's
business, financial condition, results of operations and prospects.
Risks relating to the Group's business strategy
The Group is dependent on the ability of the Directors to identify suitable investment opportunities and to
implement the Group's strategy. There is no assurance that the Group's activities will be successful in
implementing its strategy of acquiring a suitable investment that will ultimately be developed.
Environmental and other regulatory requirements
The event of a breach with any environmental or regulatory requirements may give rise to reputational,
financial or other sanctions against the Group, and therefore the Board consider these risks seriously and
designs, maintains and reviews its policies and processes so as to mitigate or avoid these risks. Whilst the
Board has a good record of compliance, there is no assurance that the Group's activities will always be
compliant.
Government intervention and regulation may have a material adverse effect on Zenith’s business. Zenith
might not be able to comply with its obligations under licences.
The oil and gas industry is subject to regulation and intervention by governments, in particular in matters such
as the award of exploration and production interests, restrictions on production and exports, environmental
measures, control over the development and abandonment of fields and installations, the nationalization or
renationalization of assets, imposition of specific drilling obligations, environmental and health and safety
protection controls and other risks relating to changes in local government regimes and policies.
In addition, Zenith has to comply with conditions contained in licenses, such as operating permits. A failure by
Zenith to comply with substantial conditions might lead to governmental intervention. Any violations of
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
19
substantial conditions may therefore have a material adverse effect on Zenith’s business, results of operations
and financial condition.
Zenith buys, sells and trades oil and gas products in certain regulated commodity markets. The oil industry is
also subject to the payment of royalties and taxation, which tend to be high compared with those payable in
respect of other commercial activities and operates in certain tax jurisdictions that feature a degree of
uncertainty relating to the interpretation of, and changes to, tax law. As a result of new laws and regulations
or government interventions, Zenith could be required to curtail or cease certain operations, or Zenith could
incur additional costs, all of which may have a material adverse effect on Zenith’s business, results of
operations and financial condition.
Lack of diversification of the Company’s business activity
The Company is currently only involved in oil production in Africa, natural gas and electricity production in Italy,
and has participating interests in oil production in USA via Leopard Energy. Therefore, any legal, regulatory or
other change of the framework conditions in one of those national industries may have a substantial negative
effect on the financial situation of the whole Group, since it will likely not be able to compensate negative
effects that appear in one field of business with its business activities in another area of operations.
Financing
The Board are seeking to grow and acknowledge that financing could depend upon the Group's ability to
obtain financing primarily through a further raising of new equity capital. The Group's ability to raise further
funds may be affected by the success of its investments both in terms of both in terms of acquisitions and
developing its asset base. The Group may not be successful in procuring the requisite funds on terms which
are acceptable to it (or at all) and, if such funding is unavailable, the Group may be required to reduce the
scope of its operations. Further, Shareholders' holdings of Ordinary Shares may be materially diluted if debt
financing is not available.
Market conditions
Market conditions, including general economic conditions and their effect on exchange rates, interest rates
and inflations rates, may impact the ultimate value of the Group regardless of its operating performance. The
Group also faces competition from other organizations, some of which may have greater resources or be more
established in a particular territory. The Board considers and reviews all market conditions to mitigate any
risks that may arise from these.
The protraction of Russia’s military aggression of Ukraine, commenced in February 2022, has made the outlook
for the medium term all the more uncertain and unpredictable.
Zenith is exposed to a major systemic risk that a prolonged conflict, an enlargement of military operations, the
impacts of the economic sanctions imposed by the international community against Russia. The possible
unilateral interruptions of hydrocarbons exports to Europe by Russia as retaliation could dampen investors or
consumers’ confidence, causing a delay or a halt in spending decisions.
Those developments could trigger a slowdown in the macroeconomic cycle, a stagnation or, under the worst
possible outcome, a global recession. Those could negatively and significantly affect demand for hydrocarbons,
which is very sensitive to macroeconomic trends, leading to a decline in hydrocarbon prices that are the main
driver of the Group’s results of operations and cash flow.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
20
Zenith has no direct or indirect engagement in the Russian upstream sector, being its production located in
different parts of the world, so the Group has no exposures towards Russia. In addition, Zenith is currently
taking into consideration new opportunities for development, investment, and expansion of its portfolio,
taking advantage of possible contingent market situations.
Substantial shareholders
As of June 11, 2024, the total number of issued Common Shares with voting rights in the Company is:
Class of share
Total number of
shares
Number of
voting rights per
share
Total number of
voting rights per class
of share
Common Shares in issue and admitted
to trading on the Main Market of the
London Stock Exchange
232,860,686
1
232,860,686
Common Shares in issue and admitted
to trading on the Euronext Growth
Market of the Oslo Stock Exchange
271,545,401
1
271,545,401
Directors’ interest
This table represents the Directors’ interests in the Company, as of the date of publication of this report:
PARTY NAME
2024
2023
NUMBER OF
ORDINARY
SHARES
% OF SHARE
CAPITAL
NUMBER OF
ORDINARY SHARES
% OF SHARE
CAPITAL
ANDREA CATTANEO
24,429,337
9.00
16,716,391
7.24
LUCA BENEDETTO
3,694,655
1.36
2,772,672
2.20
SERGEY BOROWSKIY
384,929
0.14
384,929
0.17
DARIO SODERO (1)
7,750
0.01
7,750
0.01
JOSE RAMON LOPEZ-PORTILLO
4,800
0.01
4,800
0.01
1)
Mr. Sodero controls 7,750 Common Shares of the Company in indirect ownership. The 7,750 Common Shares in which Dario
Sodero has a beneficial interest are held by Planaval Resources Ltd., a company controlled by Mr. Sodero. Mr. Sodero owns 100%
of the share capital of Planaval Resources Ltd.
The Company has been notified of the following interests of 3 percent or more in its issued share capital as at
the date of approval of this report.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
21
PARTY NAME
2024
2023
NUMBER OF
ORDINARY SHARES
% OF SHARE
CAPITAL
NUMBER OF
ORDINARY SHARES
% OF SHARE
CAPITAL
ANDREA CATTANEO
24,429,337
9.00
16,716,391
7.24
Nordnet AB
12,722,279
4.69
13,536,358
5.86
Dividends
The Directors do not propose a dividend in respect of the year ended March 31, 2024 (March 31, 2023: nil).
Events subsequent to the year end
Details of events subsequent to the year-end are set out in note 28.
Going concern
The Group's business activities, together with facts likely to affect its future operations and financial and
liquidity positions are set out in the Chairman's Statement. In addition, note 23 to the financial statements
discloses the Group's financial risk management policy and note 2 details out further considerations made by
the Directors in respect of going concern. Their consideration has included a review of forecasts, the
repayment and the restructuring of loans, the ability for fund raise and an assessment relating to two post
year-end events that may affect the future cashflows of the Company, in particular:
On November 1, 2023, the Company announced that it had initiated an ICC (International Chamber of
1. On November 29, 2023, the Company announced that the ICC (International Chamber of Commerce)
appointed Arbitral Tribunal for the arbitration claims launched against Entreprise Tunisienne d'Activités
Pétrolières ("ETAP"), the national oil company of the Republic of Tunisia (the "ICC Arbitration"), had
rejected ETAP's request to include the Tunisian State as co-defendant and ordered ETAP to pay
approximately EUR 120,000 in costs.
Zenith Energy will seek to enforce the decision with a view to receiving payment directly to the claimant,
a fully owned subsidiary of the Company, named Ecumed Petroleum Zarzis Ltd ("EPZ"), registered in
Barbados.
2. On December 6, 2023, the Company announced that its fully owned subsidiary, Canadian North Africa Oil
and Gas Limited ("CNAOG") had initiated an ICC (International Chamber of Commerce) arbitration case
seated in Paris against the Republic of Tunisia (the "CNAOG ICC Arbitration").
Background
As announced by the Company on November 22, 2021, Zenith Overseas Assets Holdings Ltd ("ZOA"), a
fully owned subsidiary of Zenith, entered into a share purchase agreement to acquire a 100% interest in
the issued, allotted, outstanding and fully paid-up share capital of CNAOG, previously named CNPC
International (Tunisia) Ltd, a then subsidiary of China National Petroleum Corporation, one of the largest
state-owned energy companies in the world (the "Acquisition").
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
22
CNAOG held an undivided 22.5% interest in the North Kairouan permit and the Sidi El Kilani Concession
in Tunisia ("SLK" or the "Concession"), as well as still owning 25% of the issued share capital of Compagnie
Tuniso-Koweito-Chinoise de Pétrole ("CTKCP"), the operating company of SLK.
For reasons unknown to the Company and devoid of any legal grounding, the Tunisian State represented
by the Ministry of Industry, Mines and Hydrocarbons arbitrarily refused to recognise the Acquisition of
CNAOG, which was performed in accordance with all applicable laws and duly notified to the local
authorities.
It is to be underlined that the Ministry's position is in contravention of established precedent, including
the acquisition of Ecumed Petroleum Tunisia Ltd, which holds a 100% interest in the Robbana and El Bibane
concessions by Compagnie Du Desert Ltd ("CDD"), a fully owned subsidiary of Zenith, announced on April
30, 2021, as well as the acquisition of Ecumed Petroleum Zarzis Ltd ("EPZ"), which held a 45% interest in
the Ezzaouia concession and still owns 50 percent ownership of MARETAP, the joint operating company
for the Ezzaouia concession, first announced on March 15, 2021.
Claim
The Company's is pleased to confirm that it has formalised a claim for damages in the amount of US$85.8
million (the "Claimed Amount") in connection with the CNAOG ICC Arbitration.
The Claimed Amount has been assessed by a third-party expert consultant in consideration of the
following:
·
CNAOG's lost production revenue and associated profitability, during a period of high energy prices,
from the SLK Concession until its initial expiry in December 2022.
·
The volume of crude oil produced from the Concession and allocated to and received by CNAOG upon
the completion of the Acquisition.
·
Unpaid invoices for oil production by ETAP, the national oil company of Tunisia.
·
The value of the 45% interest in the renewal of the SLK Concession, representing a breach of CNAOG's
right to renew its previously existing 22.5% interest in SLK, as well as the 22.5% interest held by Kuwait
Foreign Petroleum Exploration Company K.S.C.C, which relinquished its interest in the Concession
before its initial expiry.
The Company clarified that the CNAOG ICC Arbitration is being performed in parallel to the ICC Arbitration
against ETAP, announced to the market on November 1, 2023, for a total amount of US$6.5 million, and
to the arbitration pending before the International Centre for Settlement of Investment
Disputes in Washington DC ("ICSID Arbitration") , for a total cumulative claimed amount of at least US$48
million, announced to the market on June 7, 2023, following various breaches of bilateral trade agreements
committed by the Republic of Tunisia.
By way of summary, the cumulative total amount claimed across the three arbitrations is now at least
US$140.5 million.
The Directors therefore have made an informed judgment, at the time of approving the financial statements,
that there is a reasonable expectation that the Group has access to adequate resources to continue in
operational existence for the foreseeable future. As a result, the Directors have adopted the going concern
basis of accounting in the preparation of the annual financial statements. Further details on assumptions and
conclusions drawn on going concern are included in the statement of going concern included in note 2 to the
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
23
financial statements.
Auditors
RPG Crouch Chapman LLP, 40 Gracechurch Street, London, EC3V 0BT, United Kingdom, is the Issuer’s external
auditor since 15th April 2023.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with
applicable law and regulations.
The Directors are required to prepare financial statements for each financial year. The Directors have elected
to prepare the consolidated financial statements in accordance with International Financial Reporting
Standards (IFRSs) as issued by the International Accounting Standards Board (“IASB”). The Directors must not
approve the financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and of the profit or loss of the Group for that year. In preparing these financial statements,
the Directors are required to:
•
Select suitable accounting policies and then apply them consistently;
•
Make judgments and accounting estimates that are reasonable and prudent;
•
State whether applicable IFRSs as issued by the IASB have been followed, subject to any material
departures disclosed and explained in the financial statements; and
•
Prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group.
They are also responsible for safeguarding the assets of the Group, and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Group's website.
Approved by the Board dated on July 29, 2024
Signed .................... .............................
Jose Ramon Lopez-Portillo Chairman
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
24
GOVERNANCE REPORT
General
As Zenith Energy Ltd has a standard listing within the United Kingdom, it is not required to comply with the
Financial Conduct Authority’s requirements report on compliance with, and application of, the UK Corporate
Governance Code. The disclosures below, however, are required by Disclosure Guidance & Transparency Rules
and NI 58-101 Disclosure of Corporate Governance Practices. The board of directors (the “Board”) of Zenith
Energy Ltd. (the “Company”) has not adopted a Governance Code as the size of the Company and the number
of staff at the parent Company does not warrant the adoption of such code, however, the Board recognizes
that good corporate governance is of fundamental importance to the success of the Group and procedures are
in place in operating entities. The Group’s governance practices are the responsibility of the Board.
Leadership
The Group is headed by an effective Board which is collectively responsible for the long-term success of the
Group. The role of the Board is to oversee the activity of management and to decide the strategy going
forward. The role of the Non-Executive Directors is to review and monitor the activity of the Directors and
managers that are involved in the operations of the Group. Acquisitions and disposals, borrowing facilities,
equity issuances and any other major decisions out of the ordinary course of business are specifically reserved
for the Board.
The Board is formed by a highly incentivized and committed group of individuals, including founders of the
Group with significant interest in the common share capital of the Group, that understand and believe in the
Group’s strategy, providing their support even without an effective remuneration, waiting for the desired
development to lead to financial conditions such that the recognition of a fee does not divert funds from
investments.
Mr Borowskiy was unable to attend certain Board meetings due to other professional commitments and time
zone differences. However, he has provided consistent support and constant interaction with the Company’s
management, specifically in relation to the Company’s fruitful new relationship with CNPC.
The Directors attendance to meetings up to the date of this report was as follows:
Date of Board
Meeting
Jose Ramon
Lopez-
Portillo
Andrea
Cattaneo
Dario
Ezio
Sodero
Sergey
Borowskiy
Luca
Benedetto
16/08/2023 (B)
✔
✔
✔
✔
✔
27/12/2023 (AC)
✔
✔
✔
✔
✔
05/02/2024 (B)
-
✔
✔
✔
✔
AC: Audit Committee Meeting – B: Board Meeting
The Board
The Board is ultimately responsible for the effectiveness of the Group’s system of internal controls. The Board
verifies the implementation and effectiveness of the system that the top and middle management have
implemented in the Group to prevent losses, fraud, corruption and misuse of assets, human resources and
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
25
cash. Its key strategy has been to establish financial reporting procedures that provide the Board of Directors
with a reasonable basis to make judgements as to the financial position and prospects of the Group.
Executive directors and non-executive directors have been appointed by the Board to assist with the
implementation of this strategy and report progress to the Board. All the non-executive directors are
considered independent from executive directors and management.
The Group’s board of directors consists of five members namely
•
Jose Ramon Lopez-Portillo (Chairman and Non-Executive Director)
•
Andrea Cattaneo (President, CEO and Director)
•
Luca Benedetto (CFO and Director)
•
Dario Ezio Sodero (Non-Executive Director)
•
Sergey Borowskiy (Non-Executive Director)
As demonstrated by the background of the directors and managers, the Board present a large diversity in
citizenship, age, education, profession and religion. The Board is committed to equal opportunities and intends
to appoint a female Non-Executive Director in the near future.
Directorships and partnerships
In addition to their respective roles and directorships at the Group, the Directors are members of the
administrative, management or supervisory bodies (the “directorships”) or partners of the following
companies or partnerships:
Name
Current directorships/partnerships
Jose Ramon Lopez-Portillo
Hybridair Ltd
World SkyCat Ltd
Luca Benedetto
Ajax Resources Plc
Andrea Cattaneo
–
Dario Ezio Sodero
Planaval Resources Ltd
Sergey Borovskiy
ITI Capital Asia
Kaisun Holdings
General Transactions Inc.
National Agency for Direct Investment (NAPI).
South China Heavy Industries Group
Orientation and continuing education
The Board is responsible for the orientation and education of new members of the board of directors and all
new directors are provided with copies of the Group’s board and committee mandates and policies, the
Group’s by-laws, documents from recent Board meetings and other reference materials relating to the duties
and obligations of directors, the business and operations of the Group. New directors are also provided with
opportunities for meeting and discussions with senior management and other directors.
Prior to joining the board, each new director will meet with the Chief Executive Officer of the Group. Such
officer is responsible for outlining the business and prospects of the Group, both positive and negative, with a
view to ensuring that the new director is properly informed to commence his duties as a director.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
26
Each new director is also given the opportunity to meet with the auditors and counsel to the Group. As part of
the annual Board of Directors’ assessment process, the Board of Directors determines whether any additional
education and training is required for its members.
Ethical business conduct
The directors encourage and promote a culture of ethical business conduct through communication and
supervision as part of their overall stewardship responsibility. In addition, the Group has adopted a Code of
Conduct which addresses the Group’s continuing commitment to integrity and ethical behaviour. The Code of
Conduct establishes procedures that allow directors, officers and employees of the Group to confidentially
submit their concerns to the Chief Executive Officer or the Chairman of the Board regarding questionable
ethical, moral, accounting or auditing matters, without fear of retaliation. To the Group’s knowledge there
have been no departures from this Code of Conduct that would necessitate the filing of a material change
report. A copy of the Code of Conduct is available to review at the head office of the Group during business
hours.
Nomination of Directors
The Board as a whole is responsible for identifying suitable candidates to be recommended for election to the
Board by the shareholders of the Group, with the goal of ensuring that the Board consists of an appropriate
number of directors who collectively possess the competencies identified as being appropriate to the
effectiveness of the Board as a whole.
Remuneration
The Remuneration Committee is responsible for reviewing the Group’s overall compensation strategy, as well
as being responsible for reviewing and recommending for approval for the salary and compensation of the
Group’s executive officers.
The Remuneration Committee also reviews the compensation of the outside directors on an annual basis,
taking into account such matters as time commitment, responsibility and compensation provided by
comparable organizations.
The remuneration for key management personnel, specifically those persons having authority and
responsibility for planning, directing and controlling the activities of the Group, either directly or indirectly, are
detailed in the following note 7-(b) Key management compensation.
Board Committees
The Group’s Board of Directors has three committees, the Audit Committee, the Remuneration Committee
and the Corporate Governance Committee.
(a)
Audit Committee
The Audit Committee comprises Jose Ramon Lopez-Portillo, Dario Sodero and Sergey Borowskiy and is
chaired by Dario Sodero. The Audit Committee meets at least once a year and otherwise as required. It
has responsibility for ensuring that the financial performance of the Company is properly reported on
and reviewed, and its role includes monitoring the integrity of the financial statements of the Group
(including annual and interim accounts and results announcements), reviewing the effectiveness of the
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
27
Group’s internal control review function and risk management systems, reviewing any changes in
accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by
external auditors and advising on the appointment of external auditors. The Audit Committee has
unrestricted access to the Group’s external auditors. The ultimate responsibility for reviewing and
approving the annual reports and accounts and the interim reports remains with the Board. The Audit
Committee gives due consideration to laws and regulations and the requirements of the Listing Rules.
The Group has an Audit Committee Charter.
(b)
Remuneration Committee
The Remuneration Committee comprises Jose Ramon Lopez-Portillo, Dario Sodero and Sergey
Borowskiy and is chaired by Sergey Borowskiy. The Remuneration Committee has not met during the
year ended 31 March 2024. The Remuneration Committee has responsibility for determining the
Group’s policy on the remuneration packages of the Group’s chief executive, the chairman, the
executive and non-executive directors and other senior executives. The Remuneration Committee also
has responsibility for (i) recommending to the Board a compensation policy for directors and executives
and monitoring its implementation; (ii) approving and recommending to the Board and the Group’s
Shareholders the total individual remuneration package of the chairman, each executive and non-
executive director and the chief executive officer (including bonuses, incentive payments and share
options or other share awards); and (iii) approving and recommending to the Board the total individual
remuneration package of all other senior executives (including bonuses, incentive payments and share
options or other share awards), in each case within the terms of the Group’s remuneration policy and in
consultation with the chairman of the Board and/or the chief executive officer. No Director or manager
may be involved in any discussions as to their own remuneration.
(c)
Corporate Governance Committee
The Corporate Governance Committee comprises Sergey Borovskiy, Dario Sodero and Jose Ramon
Lopez-Portillo and is chaired by Jose Ramon Lopez-Portillo. The Corporate Governance Committee has
not met during the year ended 31 March 2024, but compliance matters have instead been considered
by the whole Board. The Corporate Governance Committee ensures that the Group has in place
sufficient procedures, resources and controls to enable it to comply with its continuing obligations as a
company admitted to the Standard Segment of the Official List. The Corporate Governance Committee
also monitors the Group’s procedures to approve (a) announcements to ensure that the information
disclosed by the Group is timely, accurate, comprehensive and relevant to the business of the Group
and (b) any share dealings by directors or employees or announcements made by the Group to ensure
compliance with the Group’s policies, the Market Abuse Regulation, the Disclosure Guidance and
Transparency Rules and the Listing Rules and such other regulations to which the Group is subject from
time to time.
Assessments
The Remuneration Committee is responsible for developing an annual assessment of the overall performance
of the Board and its committees.
The objective of this review is to contribute to a process of continuous improvement in the Board’s execution
of its responsibilities. To date, the Remuneration Committee and the Board have not put into place a formal
process for assessing the effectiveness of the Board as a whole, its committees or individual directors, but will
consider implementing one in the future should circumstances warrant. Based on the Group’s size, its stage of
development and the number of individuals on the Board of Directors, the Remuneration Committee and the
Board consider a formal assessment process to be inappropriate at this time. The Remuneration Committee
and the Board plan to continue evaluating the Board’s effectiveness on an ad hoc basis.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
28
CLIMATE RELATED FINANCIAL DISCLOSURES
Introduction
The Board recognises that transparency regarding climate-related risks and opportunities is critical to
maintaining the trust of our stakeholders and allows our investors to understand the implications of the
Company’s activities on climate change. The Board’s consideration of key environmental risks is included under
the principal risks and uncertainties section of the Director’s Report. The Board also presents the following
synthesis of its adoption of the recommendations of the Task Force on Climate-related Financial Disclosures
(the “TCFD”), in compliance with Listing Rule 14.3.27R issued by the UK Financial Conduct Authority (“FCA”) as
the regulator for the London Stock Exchange, structured into four sections: Governance, Risk Management,
Strategy and Metrics & Targets.
Governance
The Board actively oversees The Company’s investment strategy. At each Board meeting our Board engages in
robust discussions about its current investments and any potential investment opportunities where they
address any emerging challenges and disruptions. At the same time, our Board works with senior management
to develop a comprehensive view of the Company’s short and long-term business risks. Both the Board and
senior management team recognise that operating responsibly, which includes minimizing the environmental
impact of our operations, is fundamental to the long-term success of the Company. We believe building a
better future involves embedding climate awareness throughout our organization, starting at the top.
The Board oversees the management of specific risks and opportunities, including climate-related risks and
opportunities. The senior management team provides regular updates to our Board on their activities and, in
addition, the Board reviews the risks associated with the Company’s investment strategy throughout the year.
Risk Management
The Board recognises that climate change risk is a global issue that may impact how we run our business, both
today and in the future. As such, we continue to look for ways to improve our understanding of climate-related
risks. However, although the impact of climate change is relatively low at this stage in the Company’s
development, we are conscious that “doing nothing” isn’t an acceptable response to the impact climate change
may have on the business in the future. We are therefore working to integrate climate risk variables into our
overall risk management process and establish formal multi-disciplinary processes that engage both the Board
and senior management team.
Strategy
The Company operates from a corporate head office in Canada but holds investments in several global
jurisdictions including Italy, USA and Tunisia. The nature of these investments includes oil and gas extraction
and electricity production. The Board is conscious of the inherent environmental risks associated with the
extraction of natural resources and the production of energy. However, the Board actively encourages its
investment partners to operate within international environmental guidelines and to perform its activities
using the most up-to-date equipment.
Metrics & Targets
The Board is committed to reducing its impact on the environment in all aspects of its business activities and
in all jurisdictions in which it operates. The Board engages with all its key stakeholders and partners and
encourages the reduction of CO2 emissions throughout the value chain to promote an environment that
actively strives towards achieving ‘net zero’ by 2035. However, at this stage in the Company’s development
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
29
there are no formal metrics or targets to measure the Company’s emissions against, but the Board continues
to review the need to implement metrics & targets.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
30
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ZENITH ENERGY LTD. FOR THE YEAR ENDED 31 MARCH 2024
Opinion
We have audited the financial statements of Zenith Energy Ltd. (the ‘group’) for the year ended 31 March 2024
which comprise the Consolidated statement of comprehensive income, the Consolidated statement of changes
in equity, the Consolidated statement of financial position, the Consolidated statement of cash flows and notes
to the financial statements, including a summary of significant accounting policies. The financial reporting
framework that has been applied in the preparation of the Group financial statements is applicable law and
International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).
In our opinion, the financial statements:
•
give a true and fair view of the state of the group’s affairs as at 31 March 2024 and of the group’s loss for
the year then ended; and
•
have been properly prepared in accordance with IFRS.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the entity’s ability to continue to adopt the going concern basis
of accounting included:
•
Review of managements cash flow projections for the period ended 30 December 2025;
•
Review of management’s assumptions based on historical expenditure and contractual commitments;
•
Sensitivity analysis on cash flow forecast to consider the available headroom under different reasonably
possible scenarios;
•
Consideration of certainty of receipt of finance inflows including review of conditions precedent on
financing agreements; and
•
Review of adequacy and completeness of disclosures in the financial statements in respect of the going
concern assumption.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Group’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for
issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
31
Our approach to the audit
In planning 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. As in all of our audits, we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to issue an opinion
on the financial statements as a whole, taking into account the structure of the group and the parent company,
the accounting processes and controls, and the industry in which they operate.
Key Audit Matters
Key audit matters are those that, in our professional judgement, were of most significance in our audit of the
Financial Statements of the current year and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on:
the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
The use of the Going Concern basis of accounting was assessed as a key audit matter and has already been
covered in the previous section of this report. The other key audit matters identified are noted below.
Key audit matter
How our work addressed this matter
Carrying value of PPE
The most significant class of assets in the
Group as at 31 March 2024 were PPE of
CAD$138m
comprising
oil
and
gas
properties, of which CAD$123m relates to
Tunisia. Under IFRS, management are
required to use their estimation and
judgement in assessing the carrying value
of PPE for impairment.
Given the subjectivity and number of
estimates involved in any such assessment,
we consider this to be a key audit matter.
Our work included:
•
Reviewing management’s assessment of recoverable
amount and critically assessing all inputs;
•
Reviewing the underlying economic models used in the
Competent Persons Report (“CPR”) from which the
valuation arises and challenging the key assumptions
therein including:
•
Ensuring that the Competent Person had the relevant
expertise to perform their work to the appropriate level
of skill;
•
Comparing commodity price assumptions to future
prices;
•
Challenging key inputs into the models including the
discount rates used and benchmarking them where
appropriate.
•
Reviewing the CPR for accuracy and performing
sensitivity analysis of the various underlying assumptions;
•
Assessing the carrying value by considering the range of
valuations indicated by the differing scenarios;
•
Considering the ability of the group to perform the
required site development to ensure the site can meet
production levels included in and underlying the CPR
valuation and to have access to the capital resources
required to develop projects successfully; and
•
Reviewing the work performed by the component
auditors and requesting additional procedures where
required.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
32
Key audit matter
How our work addressed this matter
Carrying
value
of
decommissioning
provision
We expect that there will be a significant
number
of
estimates
that
require
judgement and have therefore assessed
that this is a key audit matter.
Our work included:
•
Assessing the estimated abandonment costs for key
production assets;
•
Considering the professional expertise of third parties
engaged to produce these estimates; and
•
Reviewing supporting data and requesting additional
procedures where required.
Ongoing litigations
The company has various litigations and
arbitrations
ongoing.
There may be undisclosed liabilities in
relation to the litigations, hence why we
consider this to be a key audit matter.
Our work included:
•
Enquire with management all the ongoing litigations as
well as litigations which have been resolved and the
outcome;
•
Enquire regarding the existence of possible losses arising
from litigations and claims;
•
Determining whether an associated contingent asset or
liability needs to be recognised in the financial
statements;
•
Review the accounting records for the accounting year
and the period after the year end for any evidence of
future liabilities based on events which occurred during
the year;
•
Contact solicitors to discuss legal cases which are ongoing
and assess the probability of an unfavourable outcome;
and
•
Assess the impact of litigations on the financial
statements and disclosures.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions
could influence the economic decisions of reasonable users that are taken on the basis of the financial
statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of
the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating
their effect on the financial statements as a whole.
We consider gross assets to be the most significant determinant of the Group’s financial performance used by
the users of the financial statements. We have based materiality on 1.5% of reported gross assets for the
group. Overall materiality for the group was therefore set at CAD$2.1m.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
33
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, 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 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 parent company or to cease
operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group financial reporting process.
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 it is not a guarantee that an audit conducted in
accordance with ISAs 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:
•
We obtained an understanding of the legal and regulatory frameworks within which the Group operates
focusing on those laws and regulations that have a direct effect on the determination of material amounts
and disclosures in the financial statements.
•
We identified the greatest risk of material impact on the financial statements from irregularities, including
fraud, to be the override of controls by management. Our audit procedures to respond to these risks
included enquiries of management about their own identification and assessment of the risks of
irregularities, sample testing on the posting of journals and reviewing accounting estimates for biases,
including challenging estimates made by management and discussion of those estimates with those
charged with governance.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including
those leading to a material misstatement in the financial statements or non-compliance with regulation. This
risk increases the more that compliance with a law or regulation is removed from the events and transactions
reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.
The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves
intentional concealment, forgery, collusion, omission or misrepresentation.
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.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
34
Other matters that we are required to address
We were appointed on 17 February 2023 and this is the second year of our engagement as auditors for the
Group.
We confirm that we are independent of the Group and have not provided any prohibited non-audit services,
as defined by the Ethical Standard issued by the Financial Reporting Council.
Our audit report is consistent with our additional report to the Audit Committee / Board of Directors explaining
the results of our audit.
Use of our report
This report is made solely to the parent company’s members, as a body. 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.
Mark Wilson MA, FCA (Senior Statutory Auditor)
For and on behalf of RPG Crouch Chapman LLP
Chartered Accountants
Registered Auditor
40 Gracechurch Street
London
EC3V 0BT
29 July 2024
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
35
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Financial year ended
March 31,
2024
March 31,
2023
Continuing operations
Note
CAD $’000
CAD $’000
Revenue
1,788
13,159
Cost of sales
Production costs
(1,085)
(5,750)
Depletion and depreciation
11
(3,938)
(4,747)
Gross (loss)/profit
(3,235)
2,662
Administrative expenses
5
(24,401)
(8,596)
Operating loss
(27,636)
(5,934)
Other gains and losses
8
(9,321)
(3,115)
Finance expense
9
(5,410)
(3,161)
Loss for the year before taxation
(42,367)
(12,210)
Taxation
10
-
(617)
Loss for the year from continuing operations attributable to
owners of the parent
(42,367)
(12,827)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translating foreign operations, net
of tax
(1,444)
(3,310)
Other comprehensive loss for the year, net of tax
(1,444)
(3,310)
Total comprehensive loss for the year attributable to
owners of the parent
(43,811)
(16,137)
Earnings per share
21
CAD $
CAD $
Loss for the year - basic
(0.16)
(0.01)
Loss for the year – diluted
(0.16)
(0.01)
The notes on pages 39 to 78 form part of the Financial Statements.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
36
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Financial year ended
March 31,
2024
March 31,
2023
ASSETS
Note
CAD $’000
CAD $’000
Non-current assets
Property, plant and equipment
11
134,460
227,565
Intangible Assets
540
-
Financial assets at amortised cost
12
-
780
135,000
228,345
Current assets
Inventory
13
2,031
6,448
Trade and other receivables
14
2,780
26,676
Cash and cash equivalents
207
1,442
5,018
34,566
TOTAL ASSETS
140,018
262,911
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital
16
66,224
64,087
Share warrants & option reserve
17
3,381
5,329
Contributed surplus
7,389
5,441
Retained earnings
(27,016)
16,795
Total equity
49,978
91,652
Non-current liabilities
Loans
19
438
-
Non-convertible bonds
19
31,754
25,247
Deferred consideration payable
6
15,409
67,372
Deferred tax liabilities
10
2,398
14,231
Decommissioning provision
20
23,301
32,645
Provision
-
606
Total non-current liabilities
73,300
140,101
Current Liabilities
Trade and other payables
18
7,031
19,749
Loans
19
1,870
8,697
Non-convertible bonds
19
7,622
-
Deferred consideration payable
6
217
2,712
Total current liabilities
16,740
31,158
TOTAL EQUITY AND LIABILITIES
140,018
262,911
Approved by the Board on July 29, 2024
Signed .... .............................................
Andrea Cattaneo – CEO & President
The notes on pages 39 to 78 form part of the Financial Statements.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
37
Attributable to owners of the parent
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Share
capital
Share
warrants
& option
reserve
Contributed
surplus
Retained
earnings
Total
Balance as at March 31, 2022
60,121
5,284
4,753
32,932
103,090
Loss for the year
-
-
-
(12,827)
(12,827)
Other comprehensive income
-
-
-
(3,310)
(3,310)
Total comprehensive income
-
-
-
(16,137)
(16,137)
Share issue net of costs – debt settlement
110
-
-
-
110
Share issue net of costs - private placement
3,856
-
-
-
3,856
Value of warrants issued
-
733
-
-
733
Warrants expired
-
(572)
572
-
-
Options value adjustment
-
(116)
116
-
-
Total transactions with owners recognised
directly in equity
3,966
45
688
-
4,699
Balance as at March 31, 2023
64,087
5,329
5,441
16,795
91,652
Loss for the year
-
-
-
(42,367)
(42,367)
Other comprehensive income
-
-
-
(1,444)
(1,444)
Total comprehensive income
-
-
-
(43,811)
(43,811)
Share issue net of costs – debt settlement
138
-
-
-
138
Share issue net of costs - private placement
1,999
-
-
-
1,999
Fair value of options expired
-
(563)
563
-
-
Warrants expired
-
(1,385)
1,385
-
-
Total transactions with owners recognised
directly in equity
2,137
(1,948)
1,948
-
2,137
Balance as at March 31, 2024
66,224
3,381
7,389
(27,016)
49,978
Reserve
Description and purpose
Share capital
Amount subscribed for share capital
Share warrants &
Relates to increase in equity for services received – equity settled
option reserve
share transactions
Contributed surplus
Expired share options and warrants issued in previous years
Retained earnings
Cumulative net gains and losses recognised in the consolidated
statement of comprehensive income.
The notes on pages 39 to 78 form part of the Financial Statements.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
38
CONSOLIDATED STATEMENT OF CASH FLOWS
Financial year ended
March 31,
2024
March 31, 2023
OPERATING ACTIVITIES
Note
CAD $’000
CAD $’000
Loss for the year before taxation
(42,367)
(12,210)
Options/warrants charge
17
-
733
Foreign exchange
1,436
(6,037)
Depletion and depreciation
11
3,938
4,747
Impairment of Investments in subsidiaries
11
23,218
1,969
Revaluation of property, plant and equipment
11
(2,133)
-
Impairment of inventory
659
1,146
Accretion of decommissioning provision
(9,059)
642
Finance expense
9
5,008
2,764
Change in working capital
15
15,110
(9,598)
Net cash used in operating activities
(4,190)
(15,844)
INVESTING ACTIVITIES
Acquisition of subsidiary undertaking
(540)
-
Purchase of property, plant and equipment
11
(53)
(430)
Net cash used in investing activities
(593)
(430)
FINANCING ACTIVITIES
Proceeds from issue of shares, net of transaction costs
2,137
3,966
Finance Expense
9
(4,857)
(2,192)
Repayments of loans
19
(10,703)
(5,248)
Proceeds from loans
19
3,933
5,432
Proceeds from issue of bonds
19
13,644
15,156
Repayment of bonds
19
(606)
(551)
Net cash generated from financing activities
3,548
16,563
Net (decrease) / increase in cash and cash equivalents
(1,235)
289
Cash and cash equivalents at beginning of year
1,442
1,153
Cash and cash equivalents at end of year
207
1,442
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
39
Notes to the financial statements
1.
Corporate and Group information
The consolidated financial statements of Zenith Energy Ltd. and its subsidiaries (collectively, the “Group”)
have been prepared on the basis set out below. Zenith Energy Ltd are exempt from the preparation of
separate parent company financial statements for the year ended 31 March 2024 in line with the Canada
Business Corporations Act.
Zenith Energy Ltd. (“Zenith” or the “Group”) was incorporated pursuant to the provisions of the British
Columbia Business Corporations Act on September 20, 2007 and is domiciled in Canada. The address of
the Group’s registered office is 20th Floor, 250 Howe Street, Vancouver, BC. VC6 3R8, Canada and its
business address is 15th Floor, 850 - 2nd Street S.W., Calgary, Alberta T2P 0R8, Canada. The Group’s
primary business activity is the international development of oil and gas production and development
assets. As publicly reported, the Group is currently in the process of seeking to complete a number of
acquisitions in the United States and Asia.
The Company's website is: www.zenithenergy.ca.
Zenith is a public company listed on the Main Market of the London Stock Exchange under the ticker
“ZEN”, and with its entire common share capital admitted to trading on the Euronext Growth Oslo under
the ticker “ZENA” and on the OTC Marker under the ticker “ZENAF”.
2.
Basis of preparation
The consolidated financial statements presented in this document have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).
The financial statements have been prepared under the historical cost convention except for financial
instruments which are measured at fair value through profit or loss. The financial statements are
presented in Canadian Dollars (CAD$) and have been rounded to the nearest thousand (CAD$’000) except
where otherwise indicated.
The Board has reviewed the accounting policies set out below, which have been applied consistently, and
considers them to be the most appropriate to the Group’s business activities.
Presentation and functional currency
The presentation currency of the Group is the Canadian dollar (“CAD$”).
Functional currency is the currency of the primary economic environment in which a company operates.
The functional currencies of the Group’s subsidiaries are; United States (“US$”) dollars for the subsidiaries
in Tunisia, Dubai and British Virgin Islands, Euros (“EUR”) for the subsidiary in Italy, Sterling (“GBP”) for
the subsidiary in the United Kingdom, Swiss Francs (“CHF”) for the subsidiary in Switzerland and
Norwegian Krone (“NOK”) for the subsidiary in Norway.
The functional currency is determined by the Directors by looking at a number of relevant factors including
the currency in which Group entities usually generate and spend cash and in which business transactions
are normally denominated.
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Annual Report & Financial Statements
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40
All of the transactions that are not in the functional currency are treated as foreign and indicate currency
transactions.
The factors that have determined the adoption of the CAD $ as presentation currency include:
•
mainly affects the prices at which the goods or services are consolidated;
•
Canada is the country whose regulations, market conditions and competitive forces mainly
affect the pricing policy of the entity;
•
influences the costs and expenses of the entity;
•
the funds are usually generated in that currency; and
•
the receipts from operating activities are retained in that currency.
Going concern
These financial statements have been prepared on a going concern basis which presumes that the Group
will continue its operations in the normal course of business for the foreseeable future. In assessing
whether going concern assumption is appropriate, the Directors have taken into account all relevant
available information about the current and future position of the Group. As part of their assessment, the
Directors have also taken into account the ability to raise additional funding whilst maintaining sufficient
cash resources to meet all commitments.
The Directors have reviewed the cash flow forecasts prepared by management up to and including August
2025, which are prepared on the basis that the Group continues to hold title to the Tunisian and Italian
oil and gas asset and which takes into account the fund raises completed post year end, as well as loan
and bond repayments which fall due within 12 months of the date of the signing of the financial
statements. The cashflow forecasts also include the investments in respect of the proposed acquisitions
in the United States and provisions about its claim in Congo against SMP Energies ( hereafter "SMP",
formerly Société de Maintenance Pétrolière - SMP) the rig contractor that performed drilling services in
wells TLP-103 and TLP-103C of the Tilapia oilfield during 2018-2019, and the various legal proceedings
against the Republic of Tunisia, with a total cumulative claimed amount of at least US$48 million.
In addition, the Company, as announced, is seeking to acquire new producing assets, that will deeply
modify its current cash generation situation, at the same time insuring the company from any possible
risk that may arise in Tunisia, also in the light of the ongoing arbitration which is better detailed in this
document. In particular:
On January 16, 2024, the Company announced that its subsidiary CYAP Oil, LLC, had successfully bid at
auction for a 5% royalty interest in a package of seven (7) producing wells located in the Eagle Ford
Shale, Lavaca County, Texas.
The Group believes that these financial commitments will be covered by a combination of funding
generated by operations, funds raised post year end, funds to be received from the arbitrations in Paris,
as well as further planned fund raises within the going concern period. The Directors believe that the
planned fund raises via the various sources of capital available to the Group will be successful. The Group’s
ability to raise funds has been demonstrated in the year ended March 31, 2024. However, as at the date
of approval of the financial statements, these funds have not been secured.
The Directors, having made due and careful enquiry, are of the opinion that the Group has adequate
working capital to execute its operations over the next 12 months. The Directors therefore have made an
informed judgment, at the time of approving the financial statements, that there is a reasonable
expectation that the Group has adequate resources to continue in operational existence for the
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41
foreseeable future. As a result, the Directors have adopted the going concern basis of accounting in the
preparation of the annual financial statements.
New standards and interpretations
a. Adoption of new and revised standards
No new standards, amendments or interpretations, effective for the first time for the period beginning
on or after April 1, 2023 have had a material impact on the Company.
The following IFRSs or IFRIC interpretations are those that were effective for the first time for the financial
year beginning April 1, 2023, and relevant to the entity.
Title
Description
Effective Date
IAS 1 — Presentation
of Financial
Statements
Amendments to IAS 1 Presentation of Financial
Statements and IFRS Practice Statement 2 Making
Materiality Judgements (the PS), in which it provides
guidance and examples to help entities apply
materiality judgements to accounting policy
disclosures.
Effective for annual periods
beginning on or after 1
January 2023.
IAS 8 — Accounting
Policies, Changes in
Accounting Estimates
and Errors
The amendments clarify the distinction between
changes in accounting estimates and changes in
accounting policies and the correction of errors. Also,
they clarify how entities use measurement
techniques and inputs to develop accounting
estimates.
Effective for annual periods
beginning on or after 1
January 2023.
The Directors are evaluating the impact of the new and amended standards above. The Directors believe
that these new and amended standards are not expected to have a material impact on the financial
statements of the Company.
b. New standards and interpretations in issue but not yet effective
At the date of authorization of these financial statements, the Group has not applied the following new
and revised IFRSs that have been issued but are not yet effective:
Standards Issued and Effective on or after 1 January 2024
Amendment to IAS 1 – Non-
current liabilities with covenants
These amendments clarify how conditions
with which an entity must comply within
twelve months after the reporting period
affect the classification of a liability. The
amendments also aim to improve
information an entity provides related to
liabilities subject to these conditions.
Annual periods beginning on or
after 1 January 2024.
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Annual Report & Financial Statements
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Amendment to IAS 7 and IFRS 7 -
Supplier finance
These amendments require disclosures to
enhance the transparency of supplier
finance arrangements and their effects on
an entity’s liabilities, cash flows and
exposure to liquidity risk. The disclosure
requirements are the IASB’s response to
investors’ concerns that some companies’
supplier finance arrangements are not
sufficiently visible, hindering investors’
analysis.
Annual periods beginning on or
after 1 January 2024 (with
transitional reliefs in the first
year)
Amendments to IAS 21 - Lack of
Exchangeability
An entity is impacted by the amendments
when it has a transaction or an operation in
a foreign currency that is not exchangeable
into another currency at a measurement
date for a specified purpose. A currency is
exchangeable when there is an ability to
obtain the other currency (with a normal
administrative delay), and the transaction
would take place through a market or
exchange mechanism that creates
enforceable rights and obligations.
Annual periods beginning on or
after 1 January 2025 (early
adoption is available)
The Directors do not expect that the adoption of the Standards listed above will have a material impact
on the financial statements of the Group in future periods.
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Annual Report & Financial Statements
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43
3.
Significant accounting policies
Consolidation
The following entities have been consolidated within the Group’s financial statements:
Name
Country of
incorporation and
place of business
Proportion of
ownership interest
Principal activity
Reporting period
Canoel Italia S.p.A. (1)
Genova, Italy
98.6%
Gas, electricity
and condensate
production
January -
December
Ingenieria Petrolera del
Rio de la Plata S.r.l.
Argentina
100%
Not trading
January -
December
Zena Drilling Limited
Incorporated in UAE
Place of business:
Azerbaijan
100%
Oil and gas drilling
January -
December
Zenith Suisse SA
Switzerland
100%
Oil trading
January -
December
Zenith Norway AS (2)
Norway
100%
Holding Company
January -
December
Compagnie du Desert
Holdings Ltd (3)
United Kingdom
100%
Holding Company
January -
December
Compagnie du Desert
Ltd (3)
United Kingdom
100% on behalf of
Compagnie du Desert
Holdings Ltd
Holding Company
January -
December
Ecumed Petroleum
Tunisia Ltd
Tunisia
100% on behalf of
Compagnie du Desert
Ltd
Oil production
January -
December
Leopard Energy, Inc
(formerly Cyber Apps
World Inc.) (4)
United States
99.87%
Software
Development
August - July
(1) Zenith Energy Ltd. has 100% control over Canoel Italia S.p.A.. The Group granted 1.4% to a former
Director, in order to limit the risk of any liability to that entity. Therefore, no non-controlling interest
arises from the consolidation of this subsidiary.
(2) On January 30, 2020, the Company announced the establishment of its fully owned Norwegian
subsidiary, Zenith Energy AS ("Zenith Norway"), to be used as a vehicle for intended participation in
future licensing bids to be organized by the Norwegian Ministry of Petroleum and Energy, as well as
to actively pursue the potential acquisition of working interests in mature energy production assets
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across Northern Europe.
(3) On April 30, 2021, the Company announced that Compagnie Du Desert Ltd ("CDD"), its recently
incorporated fully owned subsidiary, has entered into a share purchase agreement ("SPA") with
Candax Energy Limited ("Candax") for the acquisition of a 100 percent interest in Candax's fully owned
subsidiary in Barbados, Ecumed Petroleum Tunisia Ltd ("EPT") (the "Acquisitions"), which holds a
100% interest in the El Bibane and Robbana concessions in Tunisia.
(4) On August 29, 2023, the Company announced that it had acquired control of Leopatd Energy, Inc.
(formerly Cyber Apps World Inc.) ("CYAP") by way of a Securities Purchase Agreement ("SPA") signed
with Janbella Group LLC ("Seller").
•
Zenith has acquired 100,000 Series A Preferred Shares in CYAP from the Seller, representing
99.87% of its current total voting rights.
•
The purchase price agreed under the terms of the SPA is US$398,319.97 in cash (the
"Consideration").
•
CYAP is listed on the US OTC Markets' Pink Open Market segment under the ticker "CYAP".
Subsidiaries are entities over which the Group has control. The Group controls an entity when it is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control commences until the date on which
control ceases. Adjustments are made to the results of subsidiaries to bring the accounting policies used
by them, with those used by the Group.
Intercompany balances and transactions are eliminated on consolidation, and any unrealized income and
expenses arising from intercompany transactions are eliminated in preparing the consolidated financial
statements.
The reason for Canoel Italia S.p.A’s different reporting date is that it operates in line with the company’s
calendar year. Aligning with this redcues the administrative burden associated with amending the figures
for a different year end. The remaining subsidiaries have different year ends as they were acquired as
such and have not been amended to be in line with the Group due to the administrative burden.
The following entities have not been consolidated within the Group’s financial statements because they
are considered to be immaterial to the Group:
Name
Country of
incorporation and
place of business
Proportion of
ownership interest
Principal activity
Leonardo Energy
Consulting S.r.l.
Genova, Italy
48%
Dormant
Zenith Energy
Netherlands BV
Netherlands
100%
Dormant
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45
The following entities have been written off, in consideration of the divestments of the Company in the
country (Republic of the Congo) or due to the Arbitrations currently in progress:
Name
Country of
incorporation and
place of business
Proportion of
ownership interest
Principal activity
Reporting period
Zenith Energy (O&G)
Ltd
United Kingdom
100%
Administrative
services
April - March
Anglo African Oíl & Gas
Congo S.A.S.
Republic of the Congo
100%
Oil production
January -
December
Zenith Energy África
Holdings
United Kingdom
100%
Holding Company
January -
December
Zenith Energy África Ltd
United Kingdom
100% on behalf of
Zenith Energy
Holdings
Holding Company
January -
December
Ecumed Petroleum
Zarzis Ltd
Tunisia
100% on behalf of
Zenith Energy Africa
Ltd
Oil production
January -
December
Zenith Overseas Assets
Holdings Ltd
United Kingdom
100%
Holding Company
January -
December
Zenith Overseas Assets
Ltd
United Kingdom
100% on behalf of
Zenith Overseas
Assets Holdings Ltd
Holding Company
January -
December
Canadian North Africa
Oil&Gas Ltd
Tunisia
100% on behalf of
Zenith Overseas
Assets Ltd
Oil production
January -
December
Zenith Energy Congo SA
Republic of the Congo
100%
Oil production
January -
December
Zenith Aran Oil
Company Limited
British Virgin Islands
100%
In liquidation
January -
December
Property, plant and equipment
Development and production expenditures
Development and production (“D&P”) assets include costs incurred in developing commercial reserves
and bringing them into production. Items of property and equipment, including D&P assets, are carried
at cost less accumulated depletion and depreciation and accumulated impairment losses.
When significant parts of D&P assets have different useful lives, they are accounted for as separate items
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Annual Report & Financial Statements
For the Year Ended March 31, 2024
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(major components).
Gains and losses on disposal of D&P assets are determined by comparing the proceeds of disposal with
the carrying amount of the item and are recognised in profit or loss.
Business combinations
The acquisition method of accounting is used to account for acquisitions of subsidiaries and assets that
meet the definition of a business under IFRS. The cost of an acquisition is measured as the fair value of
the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration agreement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at fair value at the acquisition date. The excess of the cost of acquisition over the fair
value of the identifiable assets, liabilities and contingent liabilities acquired is recorded as goodwill. If the
cost of an acquisition is less than the fair value of the net assets of the subsidiary acquired, a bargain
purchase gain is recognised immediately in the consolidated statement of comprehensive income.
Transaction costs that are incurred in connection with a business combination other than those associated
with the issue of debt or equity instruments are expensed as incurred.
Intercompany balances and transactions are eliminated on consolidation, and any unrealised income and
expenses arising from intercompany transactions are eliminated in preparing the consolidated financial
statements.
Subsequent costs
Costs incurred subsequent to the determination of technical feasibility and commercial viability, costs of
replacing parts of property and equipment and workovers of property and equipment are recognised only
if they increase the economic benefits of the assets to which they relate. All other expenditures are
recognised in profit or loss when incurred. The carrying amounts of previous inspections or any replaced
or sold components are derecognized. The costs of day‐to‐day servicing of an item of property and
equipment are recognised in profit or loss as incurred.
Depletion and depreciation
The net book value of producing assets is depleted on a field‐by‐field basis using the unit of production
method with reference to the ratio of production in the year to the related proved and probable reserves,
as determined by an independent reserve engineer, taking into account estimated future development
costs necessary to bring those reserves into production. For purposes of these calculations, relative
volumes of natural gas production and reserves are converted at the energy equivalent conversion rate
of six thousand cubic feet of natural gas to one barrel of crude oil.
Impairment
At the end of each reporting period, the Group reviews the D&P assets for circumstances that indicate
the assets may be impaired. Assets are grouped together into cash‐generating units (“CGUs”) for the
purpose of impairment testing.
If any such indication of impairment exists, the Group makes an estimate of its recoverable amount. A
CGUs recoverable amount is the higher of its fair value less costs to sell and its value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount
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47
rate that reflects current market assessments of the time value of money and the risks specific to the
asset. Value in use is generally computed by reference to the present value of future cash flows expected
to be derived from the production of proved and probable reserves.
Fair value less costs to sell is determined as the amount that would be obtained from the sale of a CGU in
an arm’s length transaction between knowledgeable and willing parties. The fair value less cost to sell of
D&P assets is generally determined as the net present value of the estimated future cash flows expected
to arise from the continued use of the CGU, including any expansion prospects, and its eventual disposal,
using assumptions that an independent market participant may take into account.
These cash flows are discounted by an appropriate discount rate which would be applied by such a market
participant to arrive at a net present value of the CGU. When the recoverable amount is less than the
carrying amount, the asset or CGU is impaired. For impairment losses identified on a CGU, the loss is
allocated on a pro rata basis to the assets within the CGU. The impairment loss is recognised as an expense
in profit or loss.
At the end of each subsequent reporting period, these impairments are assessed for indicators of reversal.
Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU 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 have been
recognised for the asset or CGU in prior periods.
A reversal of an impairment loss is recognised in profit or loss.
Decommissioning provision
The Group recognizes a decommissioning obligation in the period in which a well is drilled or acquired,
and a reasonable estimate of the future costs associated with removal, site restoration and asset
retirement can be made. The estimated decommissioning provision is recorded with a corresponding
increase in the carrying amount of the related cost centre.
Decommissioning provisions are measured at the present value of management’s best estimate of the
expenditures required to settle the present obligation at the statement of financial position date.
Subsequent to the initial measurement, the provision is adjusted at the end of each period to reflect the
unwinding of discount and changes in the estimated future cash flows underlying the obligation. The
increase in the provision due to the unwinding of discount is recognised as finance expenses. Actual costs
incurred upon settlement of the decommissioning obligations are charged against the provision to the
extent the provision was established.
Cash and cash equivalents
Cash and cash equivalents consist of cash deposits in bank accounts and cash in hand.
Inventory
Inventory consists of crude oil which is recorded at the lower of cost and net realisable value. The cost of
producing crude oil is accounted on a weighted average basis. This cost includes all costs incurred in the
normal course of business in bringing each product to its present location and condition. The cost of crude
oil is the producing cost, including royalties. Net realisable value of crude oil and refined products is based
on estimated selling price in the ordinary course of business less any expected selling costs.
Financial instruments
Financial assets and financial liabilities are recognized in the Group’s statement of financial position when
the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial
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liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit
or loss are recognized immediately in profit or loss.
Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date
basis. All recognized financial assets are measured subsequently in their entirety at either amortized cost
or fair value, depending on the classification of the financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are measured subsequently at amortized cost using
the effective interest method:
•
the financial asset is held within a business model whose objective is to hold financial assets in order
to collect contractual cash flows; and
•
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through
other comprehensive income (FVTOCI):
•
the financial asset is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling the financial assets; and
•
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
By default, all other financial assets are measured subsequently at fair value through profit or loss
(FVTPL).
Despite the foregoing, the Group may make the following irrevocable election/designation at initial
recognition of a financial asset:
•
the Group may irrevocably elect to present subsequent changes in fair value of an equity investment
in other comprehensive income if certain criteria are met; and
•
the Group may irrevocably designate a debt investment that meets the amortized cost or FVTOCI
criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
Impairment of financial assets
The Group applies the expected credit loss model to financial assets measured at amortized cost or at
fair value through other comprehensive income. There are no financial assets other than trade
receivables.
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For the Year Ended March 31, 2024
49
De-recognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds
received, net of direct issue costs.
Repurchase of the Group’s own equity instruments is recognised and deducted directly in equity. No gain
or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity
instruments.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using the effective interest method.
Compound financial instruments
Compound financial instruments include convertible notes which can be converted into a fixed number
of common shares for a fixed amount of consideration. The compound financial instrument is bifurcated
and recorded with a liability and equity component. The liability component is initially recognised as the
fair value of the liability without the conversion feature, which is calculated using inputs that fall within
level 1 of the fair value hierarchy of IFRS 13. The equity component is recognised as the difference
between the fair value of the convertible debt and the fair value of the liability component.
Transaction costs are proportionately allocated between the components. Subsequently, the liability
component is measured at amortised cost using the effective interest method and accretes up to the
principal balance at maturity.
The equity component is not re‐measured after initial recognition. Upon conversion, the liability
component is reclassified to equity and no gain or loss is recognised. If the number of common shares to
which the loan can be converted is not fixed, then the loan is recorded as a liability with no debt / equity
split.
De-recognition of financial liabilities
The Group removes a financial liability (or a part of a financial liability) from its statement of financial
position when, and only when, it is extinguished-i.e., when the obligation specified in the contract is
discharged or cancelled or expires.
Amortized cost and effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of
allocating interest income over the relevant period. For financial assets other than purchased or
originated credit-impaired financial assets (i.e. assets that are credit-impaired on initial recognition), the
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effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees
and points paid or received that form an integral part of the effective interest rate, transaction costs and
other premiums or discounts) excluding expected credit losses, through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument
on initial recognition.
The amortized cost of a financial asset is the amount at which the financial asset is measured at initial
recognition minus the principal repayments, plus the cumulative amortization using the effective interest
method of any difference between that initial amount and the maturity amount, adjusted for any loss
allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before
adjusting for any loss allowance.
Interest income is recognized using the effective interest method for debt instruments measured
subsequently at amortized cost. For financial assets, interest income is calculated by applying the
effective interest rate to the gross carrying amount of a financial asset, except for financial assets that
have subsequently become credit impaired. For financial assets that have subsequently become credit-
impaired, interest income is recognized by applying the effective interest rate to the amortized cost of
the financial asset. If, in subsequent reporting periods, the credit risk on the credit-impaired financial
instrument improves so that the financial asset is no longer credit-impaired, interest income is recognized
by applying the effective interest rate to the gross carrying amount of the financial asset.
The Group’s financial assets were classified as financial assets measured subsequently at amortized cost.
The Group’s financial liabilities were classified as financial liabilities measured subsequently at amortized
cost. The Group does not choose to classify any financial liabilities as measured at fair value through profit
or loss.
Share capital
Share capital is classified as equity if it is non-redeemable, and any dividends are discretionary or is
redeemable but only at the Group's option. Dividends on share capital classified as equity are recognised
as distributions within equity. Non-equity share capital is classified as a liability if it is redeemable on a
specific date or at the option of the shareholders or if dividend payments are not discretionary. Dividends
thereon are recognised in the consolidated income statement as a financial expense.
Incremental costs directly attributable to the issue of common shares are recognised as a deduction from
equity.
Share‐based payments
The cost of providing share-based payments to employees is charged to the statement of comprehensive
income (or treated as a share issue cost) over the vesting period of the related share options or share
allocations. The cost is based on the fair values of the options, which is determined using the Black Scholes
method. The value of the charge is adjusted to reflect expected and actual level of vesting. Charges are
not adjusted for market related conditions that are not achieved. Where equity instruments are granted
to persons other than Directors or employees the consolidated statement of comprehensive income is
charged with the fair value of the related goods or services received.
Earnings per share
The Group presents basic and diluted earnings per share for its common shares. Basic earnings per share
amounts are calculated by dividing the profit or loss attributable to common shareholders of the Group
by the weighted average number of common shares outstanding during the period. Diluted earnings per
share amounts are determined by adjusting the profit or loss attributable to common shareholders and
the weighted average number of common shares outstanding, adjusted, for the effects of all dilutive
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potential common shares.
Revenue from contracts with customers
The Group enters into contracts for the sale of oil and gas. Revenue is recognised when the price is
determinable, the product has been delivered in accordance with the terms of the contract, the significant
risks and rewards or ownership have been transferred to the customer and collection of the sales price is
reasonably assured. The performance obligation is identified to be the delivery of oil and gas to the
customer, and the transaction price is allocated to the amount of oil and gas delivered. These criteria for
performance obligation are assessed to have occurred once the product has been delivered to the
customer.
Foreign currency translation
Foreign currency transactions are translated into the respective functional currencies of the Group and
its subsidiaries using the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at period end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the
consolidated statement of comprehensive income.
The financial results and position of foreign operations whose functional currency is different from the
presentation currency are translated as follows:
•
Assets and liabilities are translated at period‐end exchange rates prevailing at that reporting
date; and,
•
Income and expenses are translated at average exchange rates for the period.
Exchange differences arising on translation of foreign operations are transferred directly to the Group’s
exchange difference on translating foreign operations on the statement of comprehensive income and
are reported as a separate component of shareholders’ equity. These differences are recognised in profit
or loss in the period in which the operation is disposed.
Accounting policy for Provisions, contingent assets and liabilities
Contingent liabilities and contingent assets are not recognised in the Statement of Financial Position but
are reported in the notes. They may arise from uncertainty as to the existence of a liability or asset or
represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent
assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are
disclosed when settlement is greater than remote.
Finance expense
Finance expense is comprised of interest on debt, accretion of the decommissioning obligation, accretion
of convertible notes and other miscellaneous interest charges.
Taxation
Income tax expense is comprised of current and deferred tax and is recognised in profit or loss except to
the extent that it relates to items recognised in other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at period end, adjusted for amendments to tax payable with regards to previous
years.
Deferred tax is recorded, using the asset and liability method, on temporary differences between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes. However,
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
52
deferred tax is not recorded on taxable temporary differences arising on the initial recognition of goodwill
or on the initial recognition of assets and liabilities in a transaction other than a business combination that
affect neither accounting nor taxable profit or loss. The amount of deferred tax provided is based on the
expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantively enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable
profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognized deferred
tax assets are reassessed at each reporting date and are recognised to the extent that it has become
probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Interest-Bearing Loans and Borrowings
Interest-bearing loans and borrowings are initially recognised at fair value, which equates to the value of
proceeds received net of any directly attributable arrangement costs. Subsequent to initial recognition
these borrowings are stated at amortised cost using the effective interest rate method.
4.
Critical accounting estimates and judgements
Estimates and judgments 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 Group makes estimates and assumptions about the future. The relating accounting estimates will by
definition, seldom equal to related achieved result. The estimates and judgements that have significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are addressed below:
Going concern
Management have prepared the financial statements on a going concern basis of accounting which, as
stated in note 2, is dependent on the group being able to raise additional funding as required. This is
considered to be a critical accounting judgement.
Property, plant and equipment
Management reviews the Group’s property, plant and equipment annually for impairment indicators.
The determination of recoverable amounts in any resulting impairment test requires judgement around
key assumptions. Key assumptions in the impairment models include those related to prices that are
based on forward curves and long-term corporate assumptions thereafter, discount rates, that are risked
to reflect conditions specific to individual assets, future costs, both capital and operating that are based
on management’s estimates having regard to past experience and the known characteristics of the
individual assets, reserves and future production, which are discussed further on note 11. The carrying
value of property, plant and equipment as of March 31, 2024, was CAD$ 134,460k (2023 – CAD$227,565k).
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
53
Proved and probable reserves and contingent resources
The volume of proved and probable oil and gas reserves is an estimate that affects the unit of production
depreciation of producing oil and gas property, plant and equipment as well as being a significant estimate
affecting decommissioning provisions, impairment calculations and the valuation of oil and gas properties
in business combinations. Contingent resources affect the valuation of exploration and exploration assets
acquired in business combinations and the estimation of the recoverable value of those assets in
impairment tests.
Proved and probable reserves and contingent resources are estimated using standard recognised
evaluation techniques. Estimates are reviewed at least annually and are regularly estimated by
independent consultants. Future development costs are estimated taking into account the level of
development required to produce the reserves by reference to operators, where applicable, and internal
engineers.
The Group’s reserves are evaluated and reported on by independent reserve engineers at least annually.
The engineers issue a Competent Person’s Report (“CPR”), and the latest version was issued in July 2023
in relation to the Group’s Italian and Congolese assets. Reserve estimation is based on a variety of factors
including engineering data, geological and geophysical data, projected future rates of production,
commodity pricing and timing of future expenditures, all of which are subject to significant judgement
and interpretation.
Decommissioning costs
Most of these decommissioning events are many years in the future and the precise requirements that
will have to be met when the removal event occurs are uncertain. Decommissioning technologies and
costs are constantly changing, as well as political, environmental, safety and public expectations.
The estimated cost of decommissioning at the end of the producing lives of fields is reviewed periodically
and is based on forecast price levels and technology at the Statement of Financial Position date. Provision
is made for the estimated cost at the Statement of Financial Position date, using a discounted cash flow
methodology and a risk-free rate of return. Details of the Group’s decommissioning costs are disclosed in
note 20. The carrying value of the decommissioning costs as of March 31, 2024, is CAD $23,301k (2023 –
CAD $32,645k).
Impairment of investments in subsidiaries and non-financial assets
The Group conducts impairment reviews of investments in subsidiaries and non-financial assets whenever
events or changes in circumstances indicate that their carrying amounts may not be recoverable or tests
for impairment annually in accordance with the relevant accounting standards. Determining whether an
asset is impaired requires an estimation of the recoverable amount, which requires the Group to estimate
the value in use which based on future cash flows and a suitable discount rate in order to calculate the
present value. Where the actual future cash flows are less than expected, an impairment loss may arise.
During the year, after reviewing the business environment as well as the Group’s strategies and past
performance of its cash-generating units, management concluded that there was impairment for plant
and equipment in Tunisia. Management believes that any reasonably possible changes in the assumptions
used in the impairment reviews would not affect management’s view on impairment at current year end.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
54
5.
Administrative expenses
During the year ended March 31, 2024, the General and Administrative costs amounted to CAD$24,401k,
(2023 - CAD$8,596k). The increase was primarily due to the foreign exchange related to the retranslation
of the assets, a non-cash expense, and the non-recurring expenses related to the Arbitration process.
Furthermore, during the same period the Group incurred CAD$10,833k (2023 - CAD$3,124k) of non-
recurring expenses which relate to the impairment of the assets in Congo and Tunisia, the expenses
incurred in the arbitration process against the Republic of Tunisia and negotiation costs for the potential
acquisition of producing assets.
Year ended
March 31, 2024
March 31, 2023
CAD$’000
CAD$’000
Auditors’ remuneration - audit fees Group
293
94
Accounting and bookkeeping
83
58
Consultancy fees
4,935
6,658
Legal
-
42
Office
650
897
Administrative expenses
2,225
219
Foreign exchange (gain)/ loss
2,883
(5,974)
Salaries
1,748
2,716
Travel
751
762
General and administrative expenses
13,568
5,472
Non-recurring expenses
Bond issue costs
112
136
Listing costs (Norway and UK)
570
555
Negotiation costs for acquisitions
1,566
1,700
Arbitration costs
1,658
-
Impairment
6,927
-
Share based payments (see note 7)
-
733
Total non-recurring expenses
10,833
3,124
Total general and administrative expenses
24,401
8,596
6.
Business combinations
During the financial year, the Company announced that it purchased a company in the USA, Leopard
Energy, Inc, and in January 2024 announced the acquisition of a 5% royalty interest in a package of seven
(7) producing wells located in the Eagle Ford Shale, Lavaca County, Texas.
These acquisitions had a not material impact as a business acquisition.
The deferred consideration liability, on the business combinations related to past financial years, has
been measured at the present value of contracted future cash flows. The value and timing of contracted
future cash flows has been included in note 25.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
55
7.
Staff cost
(a) Employee compensation cost
During the year the Group had an average of 34 (2023: 38) full time employees based in its offices in
London in the UK, Lugano in Switzerland, Pointe Noire in Congo, Tunis in Tunisia and Genoa in Italy.
The following table details the amounts of total employee compensation included in the consolidated
statement of comprehensive income:
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Operating
75
893
General and administrative
1,748
2,716
Share based payments
-
733
Total employee compensation cost
1,823
4,342
(b) Key management compensation
Key management personnel are those people having authority and responsibility for planning,
directing and controlling the activities of an entity, either directly or indirectly. The following table
summarizes annual compensation and long-term compensation of the Group's "Named Executive
Officers" for the two most recently completed financial years that ended on March 31, 2024. The
named executive officers equate to key management personnel:
Name
Year(2)
Short term
employee
benefit CAD
$’000
Other short-
term benefits
CAD $’000
Other
long-term
benefits
CAD
$’000
Other
benefits
CAD $’000
Total
CAD $’000
Andrea Cattaneo
(1)
2023
560
-
-
-
560
2024
559
-
-
-
559
Jose Ramon
Lopez-Portillo
2023
20
-
-
-
-
2024
.
-
-
-
-
Luca (2)
Benedetto
2023
261
-
-
1
262
2024
263
-
-
-
263
For the Key management personnel, no termination benefits are provided.
Notes:
1. Andrea Cattaneo was appointed President and Chief Executive Officer effective 01 January 2009. As
proposed by the Compensation Committee, Mr. Cattaneo’s annual consulting fee payment is
approximately £210k (CAD $359k), payable in equal monthly instalments, plus an annual bonus
compensation of CAD$200k from the parent Company.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
56
2. Mr. Luca Benedetto was appointed as Chief Financial Officer from April 2017 and received
compensation of CAD$164k from the parent Company and CAD$99k from subsidiary undertakings
during the year ended March 31, 2024.
3. Mr. Dario Sodero and Mr. Sergey Borovskiy did not receive any compensation for the financial year
ended 31 March 2024 and 2023.
a.
Key management non-cash compensation
During the last two financial year the Company has not granted stock options to the Directors or
employees of the Company.
8.
Other gains and losses
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Impairment of property, plant and equipment
-
(1,969)
Impairment of inventory
(659)
(1,146)
Impairment of former subsidiary undertakings
(10,795)
-
Gain on revaluation of assets
2,133
-
(9,321)
(3,115)
9.
Finance expense
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Interest expense
5,008
2,764
Accretion of decommissioning provision
402
397
5,410
3,161
10. Taxation
Income tax expense is comprised of current and deferred tax and is recognised in profit or loss except
to the extent that it relates to items recognised in other comprehensive income or directly in equity. In
this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at period end, adjusted for amendments to tax payable with regards to previous
years.
The Company recognizes uncertain income tax positions at the largest amount that is more likely than
not to be sustained upon examination by the relevant taxing authority. An uncertain income tax position
will not be recognized if it has less than a 50% likelihood of being sustained. Recognition or measurement
is reflected in the period in which the likelihood changes. Any interest and penalties related to
unrecognized tax liabilities are presented within income tax expense (recovery) in the consolidated
income statement.
Deferred tax is recorded, using the asset and liability method, on temporary differences between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However,
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
57
deferred tax is not recorded on taxable temporary differences arising on the initial recognition of
goodwill or on the initial recognition of assets and liabilities in a transaction other than a business
combination that affect neither accounting nor taxable profit or loss. The amount of deferred tax
provided is based on the expected manner of realization or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the statement of financial position
date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it is no longer probable that sufficient future
taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognized
deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Income tax expense is comprised of the following:
2024
2023
CAD $’000
CAD $’000
Current tax
-
(1,708)
Deferred tax
-
-
Total tax charge for the year
-
(1,708)
The provision for income taxes differs from the expense that would be obtained by applying the
Canadian statutory income tax rate. The difference between tax expense for the year and expected
income taxes based on the statutory tax rate arises as follows:
2024
2023
CAD $’000
CAD $’000
Loss before taxation
22,070
277
Expected tax at 27%
5,959
75
Differences on tax rates attributable to other jurisdictions
-
(4,536)
Non-deductible expenses
(224)
1,133
Temporary differences
(787)
Tax assets carried forward
(4,948)
1,620
Tax charge
-
(1,708)
The tax charge for the year ended March 31, 2024 comprised CAD $Nil (2023 – CAD $1,708k) of current
tax expense and CAD $Nil deferred tax expense (2023 – CAD $Nil deferred tax expense).
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
58
Recognised deferred tax liabilities are attributable to the following:
2024
2023
CAD $’000
CAD $’000
Property and equipment
-
(14,211)
Decommissioning obligations
-
3,649
Non-capital loss carried forward
-
10,562
Acquisition of Canoel Italia S.r.l.
(2,398)
(2,398)
Acquisition of Tunisia
-
(11,833)
Recognised deferred tax liabilities
(2,398)
(14,231)
Deferred tax assets have not been recognised in respect of the following temporary differences as it is
not considered probable that sufficient taxable income will allow the deferred tax assets to be utilised
and recovered:
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Property and equipment
6,422
18,216
Non-capital loss carried forward
938,563
836,960
Share issuance costs
-
-
Financial assets at amortised cost
-
16,598
Decommissioning obligations
-
-
Capital losses
329
907
Other
-
-
Unrecognised deferred tax assets
945,314
872,681
11. Property, plant and equipment
D&P Assets
Carrying amount at March 31, 2022
229,774
Additions
430
Depletion and depreciation
(4,747)
Impairment
(1,969)
Foreign exchange differences
4,077
Carrying amount at March 31, 2023
227,565
Additions
53
Depletion and depreciation
(3,937)
Impairment
(89,509)
Revaluation of assets
2,133
Foreign exchange differences
(1,845)
Carrying amount at March 31, 2024
134,460
Impairment test for property, plant and equipment
As of March 31, 2024, a review was undertaken of the carrying amounts of property, plant and equipment
to determine whether there was any indication of a trigger that may have led to these assets suffering an
impairment loss.
According to the intention of the Company to disinvest in the Republic of the Congo, and in relation to
the Arbitrations against the Republic in Tunisia (for Ecumed Petroleum Zarzis and Canadian North Africa
Oil&Gas), the Board decided to totally impair the value of the assets for these entities.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
59
For the other amounts included in Property, plant and equipment, the Board continued to apply the
evaluation method applied in the previous years.
As there is no readily available market for the Group’s oil and gas properties, fair value is derived as the
net present value of the estimated future cash flows arising from the continued use of the assets,
incorporating assumptions that a typical market participant would take into account. The value in use of
an oil and gas property is generally lower than its Fair Value Less Costs of Disposal (‘FVLCD’) as value in
use reflects only those cash flows expected to be derived from the asset in its current condition. FVLCD
includes appraisal and development expenditure that a market participant would consider likely to
enhance the productive capacity of an asset and optimize future cash flows. Consequently, the Group
determines recoverable amount based on FVLCD using a Discounted Cash Flow (‘DCF’) methodology.
The DCF was derived by estimating discounted after-tax cash flows for each CGU based on estimates that
a typical market participant would use in valuing such assets. The impairment tests compared the
recoverable amount of the respective CGUs noted below to the respective carrying values of their
associated assets. The estimates of FVLCD meet the definition of level three fair value measurements as
they are determined from unobservable inputs.
Revaluation of the assets
During the year, the Group revalued its assets (Drilling RIG). The effective date of the revaluation was 29 December
2023. The revaluation was performed by an independent valuer, Eng. Angelo D’Ambrosio.
The revaluation was based on the market approach, using recent market transactions for similar
properties in the same locations. Key assumptions included adjustments for differences in size, location,
and condition of the properties.
The carrying amount of asset that would have been recognized had the assets been carried under the cost
model is Euro 3,700,000 (CAD$ 5,406,775).
As a result of the revaluation, a revaluation surplus of CAD$ 2,133,389 was recognized. The revaluation
surplus is included in P&L and presented in equity as part of retained earnings. There are no restrictions
on the distribution of this surplus to shareholders.
The revalued amount of the asset as of the revaluation date is CAD$ 5,406,775.
Italian Cash Generating Unit
Key assumptions:
•
Production profiles: these were based on the latest available information from management.
•
Capital and operating costs: these were based on the current operating and capital costs in Italy.
•
Gas price: An average 2024 gas price of $13.10/Mscf based on information from the World Bank
European gas price forecast and information provided by management.
•
Discount rate: The estimated fair value less costs to sell of the Italian CGU was based on 10%
(2023 – 10%). This was based on a Weighted Average Cost of Capital analysis consistent with that
used in previous impairment reviews.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
60
Tunisia Cash Generating Unit
The Group decided to impair the Tunisian assets that related to Ecumed Petroleum Zarzis (Ezzauoia
concession) and Canadian North Africa Oil % Gass (Side El Kilani concession), being these assets involved
in the Arbitration against the Republic of Tunisia.
This resulted in an impairment amount, recognised in the Profit and Loss statement of CAD$ 16,603k.
Further, the Company commissioned a Competent Person’s Report (“CPR”) for the Tunisian licence in
Robbana and El Bibane concessions (Ecumed Petroleum Tunisia) in compliance with Canadian securities
laws, specifically the COGE Handbook and National Instrument 51-101 - Standards of Disclosure for Oil
and Gas Activities. The field estimates of the reserves held suggest that no further impairment is required.
Details of these reserves can be found at: www.zenithenergy.ca.
12. Non-current financial assets held at amortised cost
13. Inventory
As of March 31, 2024, inventory consists of CAD$1,886 (2023 – CAD $5,591k) in relation to 9,899 barrels
of crude oil that has been produced but not yet sold, and CAD$145k of materials (2023 – CAD $857k).
The amount recognised as an expense during the year was -CAD $476k (2023 - -CAD $559).
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Tunisia
1,886
5,591
Tunisia – materials
145
857
2,031
6,448
14. Trade and other receivables
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Trade receivables
952
11,770
Other receivables
1,828
14,906
Total trade and other receivables
2,780
26,676
The Group applies the IFRS 9 simplified approach for measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure expected credit losses on a collective
basis, trade receivables are grouped based on similar credit risk and ageing. The Group’s customer base
is of a similar bracket and share the same characteristics, as such these have been treated as one
population. The Group’s customers are all State customers, therefore, the lifetime expected losses are
considered to be CAD$ Nil.
March 31, 2024
March 31, 2023
CAD $’000
CAD $’000
Other assets acquired on business
combination
-
780
-
780
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
61
15. Change in working capital
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Trade and other receivables
23,714
(7,797)
Inventory
4,417
1,998
Prepaid expenses
181
(64)
Trade and other payables
(13,202)
(2,735)
Total change in working capital
15,110
(8,598)
16. Share capital
Zenith is authorised to issue an unlimited number of Common Shares, of which 40,515,164 were issued
at no par value and fully paid during the FY ended March 31, 2024 (2023 – 43,772,809). All Common
Shares have the right to vote and the right to receive dividends. Zenith is authorised to issue an unlimited
number of preferred shares, issuable in series, of which none have been issued as of the date of these
Financial Statements. The Directors of the Group may by resolution fix the rights, privileges, restrictions
and conditions of the preferred shares of each series.
Following the issue of the new Ordinary Shares, the Company had 271,545,401 common shares in issue
and admitted to trading on the Euronext Growth of the Oslo Stock Exchange, of which 232,860,686
common shares in issue and admitted to trading on the Main Market of the London Stock Exchange, as
of June 11, 2024.
Description
common shares
CAD $’000
Balance - 31 March 2022
1,872,574,449 60,121
Non-brokered unit private placement (i)
425,228,088 3,856
Settlement of debt (ii)
12,500,000 114
share issue cost
-
(4)
Balance - 31 March 2023
2,310,302,537 64,087
Consolidation of shares 10/1 (iii)
Balance - 30 September 2023
231,030,237 64,087
Non-brokered unit private placement (iv) 37,856,250 1,999
Debt Settlement (vi
2,658,914 142
share issue cost
(4)
Balance - 31 March 2024
271,545,401 66,224
i)
on February 28, 2023, the Company announced that it had completed a fundraise in the United
Kingdom (the "UK Financing"), and in Norway (the "Norwegian Financing", collectively, the
"Financings").
The Financings attracted the participation of existing institutional investors, including Premier
Miton Investors, as well as Directors and employees of the Company, to raise an aggregate
total amount of approximately £2,300,000 or NOK 28,484,580, resulting in the issuance of
437,728,088 new common shares.
Issue Price
The issue price of the Financings was £0.0054 for the UK Financing and NOK 0.067 for the
Norwegian Financing.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
62
Norwegian Financing
Zenith issued a total of 378,931,792 new common shares of no-par value in the capital of the
Company ("Norwegian Financing Common Shares"), to be admitted to trading on the
Euronext Growth Oslo (the "Norwegian Financing Admission") raising gross proceeds of NOK
25,388,430 (approximately £2,050,000).
UK Financing
Zenith issued a total of 46,296,296 common shares of no-par value in the capital of the
Company on the London Stock Exchange (the "UK Financing Common Shares") to raise gross
proceeds of £250,000 (approximately NOK 3,096,150).
Debt Settlement
The Company has allotted 12,500,000 Common Shares ("Debt Settlement Shares") to a service
provider in lieu of cash settlement for services provided to Zenith for a total value of £67,500.
ii)
On September 20, 2023, the Company announced that it is implementing the share
consolidation that was approved by shareholders at the Company's annual general meeting
held on April 14, 2023 (the "Consolidation"). Under the Consolidation, one new common
share of no par value ("New Common Shares") will be issued for every ten existing common
shares of no par value ("Old Common Shares").
iii)
On February 13, 2024, the Company announced that it had completed private placement in
the United Kingdom and in Norway resulting in the issuance of a total of 37,856,250 new
common shares.
Issue Price
The Financings were completed at price of £0.03 (3 pence) for the UK Financing and NOK 0.42
for the Norwegian Financing, representing a premium in respect of the closing price of the
Company's equity securities on both the London Stock Exchange and Euronext Growth Oslo
on February 12, 2024.
The Company also allotted 2,658,914 Common Shares ("Debt Settlement Shares") to certain
service providers in lieu of cash settlement for services provided to Zenith.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
63
17. Warrants and options
Number of
options
Number of
warrants
Weighted
average exercise
price CAD$
Amount
CAD$’000
Balance – March 31, 2022
187,257,445
529,395,330
0.03
5,284
Warrants issued
-
127,568,427
0.01
734
Warrants expired
-
(210,761,734)
0.04
-572
Options adjustment
-116
Balance – March 31, 2023
187,257,445
446,202,023
0.03
5,329
Consolidation effect (1)
(168,531,701)
(401,581,821)
Warrants expired
-
(30,504,048)
0.40
-1,385
Options expired
(637,451)
-
1.20
- 563
Balance – March 31, 2024
18,088,293
14,116,154
0.30
3,381
1) On September 20, 2023, the Company announced that it would proceed with the implementation of the
share consolidation approved by shareholders at the Company's annual general meeting held on April 14,
2023 (the "Consolidation"). Under the Consolidation, one new common share of no par value was issued
for every ten existing common shares of no par value. The same effect involved the outstanding warrants
and options.
WARRANTS
During the year ended March 31, 2024, the Company issued no warrants (2023 – 127,568,427), and 30,504,048
(2023 – 210,761,734) warrants expired.
The expiry of 30,504,048 (2023 – 210,761,734) warrants during the year was recognised in the contributed
surplus amount of Equity section in the amount of CAD$1,385k.
As of March 31, 2024, the Group had 14,116,154 (2023 – 446,202,023) warrants outstanding (relating to
14,116,154 shares) and exercisable at a weighted average exercise price of CAD$0.02 per share with a
weighted average life remaining of 5.2 years.
There were no warrants in the money as of March 31, 2024.
OPTIONS
Grant Date
March 31, 2024
March 31, 2023 (restated for
comparative figures)
Expiry Date
Number of
options
Exercise
price per
unit CAD$
Number of
options
Exercise price
per unit CAD$
April 2018
-
-
637,451
1.20
April 2023
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
64
December 2020
4,142,857
0.30
4,142,857
0.30
December 2025
January 2021
4,541,478
0.30
4,541,478
0.30
January 2026
13 May 2021
3,257,108
0.20
3,257,108
0.20
May 2026
06 September 2021
1,388,223
0.20
1,388,223
0.20 September 2026
31 January 2022
4,758,628
0.20
4,758,628
0.20
January 2027
TOTAL
18,088,294
0.30
18,725,745
0.30
During the year ended March 31, 2024, the Company issued NO stock options (2023 – Nil), the options
exercised were Nil (2023 - Nil) and 637,451 (2023 – Nil) stock options expired.
As of March 31, 2024, the Group had 18,088,294 (2023 – 18,725,745) stock options outstanding (relating to
18,088,294 shares).
There were no options in the money as of March 31, 2024
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
65
STOCK OPTIONS
The Group has a stock options plan (the "Plan") for its directors, employees and consultants. The maximum
number of shares available under the Plan is limited to 10% of the issued and outstanding common shares at
the time of granting options. Granted options are fully vested on the date of grant, at which time all related
share‐based payment expense is recognised in the consolidated statement of comprehensive income. Share
options expire five years from the date of granting.
The table below represent the movement of the options during the FY 2024, and the comparative period 2023
Number of options
Balance – March 31, 2022
187,257,445
Options issued
-
Options expired
-
Balance – March 31, 2023
187,257,445
Consolidation effect
(168,531,691)
Options issued
-
Options expired
(637,451)
Balance – March 31, 2024
18,088,294
As of March 31, 2024, the Group had 18,088,294 stock options outstanding (relating to 18,088,294 shares) and
exercisable at a weighted average exercise price of CAD$ 0.30 per share with a weighted average life remaining
of 2.7 years.
The fair value of the options was calculated using the Black-Scholes pricing model calculations based on the
following significant assumptions:
Risk-free interest rate
0.50% - 0.70%
Expected volatility
100%
Expected life
5 years
Dividends
Nil
WARRANTS
Issue date
Number of options
Exercise price
Expiry date
Warrants
23-Apr-21
1,359,311
$0,20
23-Apr-24
Warrants
28-Feb-23
11,367,954
$0,10
28-Feb-26
Warrants
28-Feb-23
1,388,889
$0,10
28-Feb-26
Total warrants as of 31 March 2024
14,116,154
As of March 31, 2024, the Group had 14,116,154 (2023 – 446,202,023) warrants outstanding (relating to
14,116,154 shares) and exercisable at a weighted average exercise price of CAD$0.10 per share with a
weighted average life remaining of 1.3 years.
The fair value of the warrants was calculated using the Black-Scholes pricing model calculations based on the
following significant assumptions:
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
66
Risk-free interest rate
0.50% - 0.70%
Expected volatility
75-100%
Expected life
3 years
Dividends
Nil
18. Trade and other payables
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Trade payables
4,002
12,882
Other payables
3,029
6,867
Total trade and other payables
7,031
19,749
19. Loans
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Loan payable - current
1,870
8,697
Loan payable – non-current
438
-
Total
2,308
8,697
Loans – current
2024
2023
CAD $’000
CAD $’000
As at 1 April
8,697
6,533
Loan receipt
3,495
3,848
Interest
152
572
Repayments
(10,703)
(2,222)
Foreign Exchange
229
(34)
As at 31 March
1,870
8,697
Loans – non current
2024
2023
CAD $’000
CAD $’000
As at 1 April
-
1,442
Repayments
-
(1,442)
Loan receipt
438
-
As at 31 March
438
-
a)
Loan in Italy Euro 300,000
In January 2024, the Group obtained a Euro 300,000 (CAD$ 438,339) loan from ReteFidi Liguria. The
loan is unguaranteed, and bears interest at 9% per annum and the final repayment is due in January
2029.
The Company will pay only interest for the first two years, then a repayment in monthly instalments
of principal and accrued interest, will be payable.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
67
b)
Loan from Ajax Resources Plc
During the Financial Year ended March 31, 2024, Ajax Resources Plc granted the Company a loan of
CAD$557K, paid in more tranches and partially repaid for CAD$ 543k. The loan is unsecured, bears
fixed interest at a flat rate of 10%. The total outstanding amount as of March 31, 2024, was CAD$ 14k,
that was totally repaid in June 2024.
Non-convertible bonds
March 31,2024
March 31,2023
CAD $’000
CAD $’000
Current
7,622
-
Non-current
31,754
25,247
Total
39,376
25,247
Non-convertible bonds
CAD $’000
Balance – March 31, 2022
10,360
Loan notes
15,156
Interest
-
Repayment of bonds
(551)
Foreign exchange
282
Balance – March 31, 2023
25,247
Loan notes
13,643
Interest
-
Repayment of bonds
(605)
Foreign exchange
1,091
Balance – March 31, 2024
39,376
Loan Notes
To fund the acquisition of assets, and their development, to avoid an excessive dilution of its share
capital the Company issued unsecured, multi-currency (GBP, Euro, CHF and USD) Medium Term
Notes at par value (the "Notes"), admitted to trading on the Third Market (MTF) of the Vienna Stock
Exchange ("Wiener Borse AG") and bearing interest payable semi-annually.
As of March 31, 2024, the Company sold Notes for an aggregate total amount of CAD$ 28.085.723,
net of Note expired and repaid in January 2024 for CAD$ 41,624 (March 31, 2023, comparative
aggregate amount CAD$ 25,246,994),as follows:
EMTN (Bond)
Currency
CAD$ equivalent
EMTN (Bond) EURO
CAD$
6,862,218
EMTN (Bond) GBP
CAD$
5,304,706
EMTN (Bond) USD
CAD$
15,918,800
TOTAL
28,085,723
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
68
The issue of the Notes is aligned with the Group’s strategy of diversifying its financing towards non-
equity dilutive funding to support its successful development.
The Company has been using the EMTN Programme to finance its activities in the USA, Central Asia
and Italy. The Company chose the Vienna Stock Exchange as it was viewed as a highly accessible market
in terms of simplicity of process and listing costs.
During the year, the Company announced that it had fully paid the semi-annual interest in relation to
the Notes.
20. Decommissioning provision
The following table presents the reconciliation of the carrying amount of the obligation associated with
the reclamation and abandonment of the Group’s oil and gas properties:
2024
2023
CAD $’000
CAD $’000
Balance – beginning of year
32,645
30,901
Accretion
765
642
On impairment of subsidiary
(9,824)
-
Foreign currency translation
(285)
1,102
Balance – end of year
23,301
32,645
The provision has been made by estimating the decommissioning cost at current prices using existing
technology. The following significant weighted average assumptions were used to estimate the
decommissioning obligation:
Italy
2024
2023
Undiscounted cash flows – uninflated
CAD $8,000
CAD $8,000
Undiscounted cash flows ‐ inflated
CAD $8,000
CAD $8,000
Risk free rate
CAD $8,000
CAD $8,000
Inflation rate
1.4%
1.4%
Expected timing of cash flows
10.5 years
11.5 years
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
69
Tunisia
2024
A - Decommmissioning provision recalculation
Description
MARETAP
Estimation in USD
Comments
Start current period
01/04/2023
Anticipated abandonment date
31/12/2033 Minus between, economic and legal end of date (cf. IM.7
impairment test)
Years to abandonment
10,91
Undiscounted well costs
4.176.600 2019 figures submitted to DGH, while estimation is outdated
(2014)
Undiscounted facilities costs
3.050.000
Total undiscounted obligation
7.226.600
TND inflation rate (as per the Tunisian Central Bank)
7,50% Even if current inflation rates are higher ( 10% in Tunisia and 5%
for the USD, we'll keep the same parameter since these changes
are situational
USD inflation rate (as per the submitted assumption to
DGH)
3,30%
Inflation Rate
6,10% TND share expenses are higher than USD
Inflated obligation
13.786.245
Discount Rate
4,26% 10 year US Bond rate
Discounted obligation in USD
8.746.048
USD/TND FX rate as at 31.03.2022
3,1206
March 2024 USD/FX rate (CBT)
Discounted obligation in TND
27.292.918
B - Unwinding interest recalculation
Interest unwind of the obligation for the period
1.162.678
C - DD&A of the period ARO
DD&A of the period (using linear method)
2.502.025
The timings of the cash flows depend on the capital expenditure incurred and the development of assets
in each concession. Each concession has a license for a set number of years; however, the licenses could
be extended for longer periods if the operator incurs capital expenditure and develops the area. The
application process starts after a license is not extended or when the reserves of a particular concession
have been fully extracted.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
70
21. Earnings per share
March 31,2024
CAD $’000
March 31,2023
CAD $’000
Net loss from continuing operations
(42,367)
(12,827)
Basic weighted average number of shares
269,229
2,298,833
Potential dilutive effect on shares issuable under warrants
n/a
n/a
Potential diluted weighted average number of shares
n/a
n/a
Net earnings per share – basic (1)
$
(0.16)
$
(0.01)
Net earnings per share – diluted (1)
$
(0.16)
$
(0.01)
(1) The Group did not have any in-the-money convertible notes, warrants and stock options during
the years ended March 31, 2024, and 2023.
22. Related party transactions
Related party transactions are considered to be in the normal course of operations and are initially
recognized at fair value. The related party transactions during the Financial Year ended March 31, 2024,
and 2023 not disclosed elsewhere in these consolidated financial statements are as follows:
a) On February 13, 2024, in connection with the Financing through a capital raise, Mr. Andrea
Cattaneo, Chief Executive Officer & President of Zenith, has subscribed for 7,712,946 common
shares of no-par value in the capital of the Company.
Upon Admission, Mr. Cattaneo will be directly beneficially interested in a total of
24,429,337 Common Shares in the capital of the Company, representing 9.00% percent of the total
issued and outstanding common share capital of the Company.
b) On February 13, 2024, in connection with the Financing through a capital rase Mr. Luca Benedetto,
Chief Financial Officer of Zenith has subscribed for 921,983 common shares of no-par value in the
capital of the Company in connection with the Norwegian Financing.
Upon admission, Mr. Benedetto will be directly beneficially interested in a total of 3,694,655
common shares in the capital of the Company, representing 1.36% percent of the total issued and
outstanding common share capital of the Company.
c) During the year, the Group recorded enchantments of CAD$ 248k to other related parties (2023:
payment CAD$ 253k).
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
71
23. Financial risk management and financial instruments
March 31, 2024
March 31, 2023
Financial assets at amortised cost
CAD $’000
CAD $’000
Trade and other receivables (b)
2,780
26,676
Cash and cash equivalents (b)
207
1,442
Total financial assets
2,987
28,118
March 31, 2024
March 31, 2023
Financial liabilities at amortised cost
CAD $’000
CAD $’000
Trade and other payables
7,031
19,749
Loans
2,308
8,697
Non-convertible bond and notes
39,376
25,247
Deferred consideration
15,626
70,084
Total financial liabilities
64,341
123,777
Zenith finances its operations through a mixture of equity, debt and retained earnings. Finance
requirements are reviewed by the Board when funds are required for acquisition, exploration and
development of projects.
Zenith’s policy is to maintain an appropriate financial position to sustain future development of the
business. There were no changes to the Group’s capital management approach during the year ended
March 31, 2024.
Zenith’s treasury functions, which are managed by the board, are responsible for managing fund
requirements and investments which include banking, cash flow management, interest and foreign
exchange exposure to ensure adequate liquidity to meet cash requirements.
Zenith’s principal financial instruments are cash and deposits, and also trade and other receivables.
These instruments are used for meeting the Group’s requirement for operations.
Zenith’s main financial risks are foreign currency risk, liquidity risk, interest rate risk, commodity price
risk and credit risks. Set out below are policies that are used to manage such risks:
a) Credit risk
Credit risk is the risk of an unexpected loss if a customer or counter party to a financial instrument fails
to meet its commercial obligations. The Group’s maximum credit risk exposure is limited to the carrying
amount cash of CAD $ 207k (2023 – CAD $1,442k) and trade and other receivables of CAD $ 2,630k
(2023 – CAD $25,047).
Deposits are, as a general rule, placed with banks and financial institutions that have credit rating of
not less than AA or equivalent which are verified before placing the deposits.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
72
The composition of trade and other receivables is summarized in the following table:
The receivables related to the sale of oil and natural gas are due from large companies who participate in the
oil and natural gas industry in Italy and Tunisia. Oil and natural gas sales receivables are typically collected in
the month following the sales month. No expected credit losses have been recognized in respect of trade
receivables of this nature.
The Group’s receivables are aged as follows:
March 31, 2024
March 31, 2023
CAD $’000
CAD $’000
Current
952
11,770
90 + days
-
-
952
11,770
b) Liquidity risk
Liquidity risk is the risk that the Group will incur difficulties meeting its financial obligations as they are
due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have
sufficient liquidity to meet its liabilities when due, under both normal and distressed conditions
without incurring unacceptable losses or risking harm to the Group’s reputation.
The Directors have considered the recoverability of the outstanding debts of the Group and do not
consider there to be any impairment necessary.
As of March 31, 2024, the contractual cash flows, including estimated future interest, of current and
non-current financial assets mature as follows:
Carrying
Amount
Contractual
cash flow
Due on or
before
31 March
2025
Due on or
before 31
March
2026
Due after 31
March 2026
CAD $’000
CAD $’000 CAD $’000 CAD $’000
CAD $’000
Trade and other receivables
2,780
2,780
2,780
-
-
Cash and cash equivalents
207
207
207
-
-
2,987
2,987
2,987
-
-
March 31, 2024
March 31, 2023
CAD $’000
CAD $’000
Oil and natural gas sales
952
11,770
Other
1,828
13,277
2,780
25,047
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
73
As of March 31, 2024, the contractual cash flows, including estimated future interest, of current and
non-current financial liabilities mature as follows:
Carrying
Amount
Contractual
cash flow
Due on or
before
31 March
2025
Due on or
before 31
March
2026
Due after 31
March 2026
CAD $’000
CAD $’000 CAD $’000 CAD $’000
CAD $’000
Trade and other payables
7,031
7,031
7,031
-
-
Loans
2,308
2,509
1,919
39
551
Non-convertible bond
39,376
46,538
11,150
23,371
12,017
48,715
56,078
20,100
23,410
12,568
The Company expects to pay the outstanding liability using a combination of factor, as the local liquidity for
the Italian loan, the funds raised by its financing activity, the partial refinancing of short-term debt,
restructuring it in the medium and long term by the bond exchange and, above all, the proceeds from the
arbitrations.
c) Foreign currency risk
Foreign currency exchange risk is the risk that the fair value of future cash flows will fluctuate as a
result of changes in foreign exchange rates. Foreign exchange rates to Canadian dollars for the noted
dates and periods are as follows:
Closing rate
Average rate
2024
2023
2024
2023
US Dollars
1.3540
1.3529
1.3496
1.3226
Euro
1.4611
1.4716
1.4634
1.3771
Swiss Franc
1.5005
1.4790
1.5256
1.3856
British Pound
1.7085
1.6732
1.6958
1.5933
Norwegian Crown
0.1247
0.1296
0.1269
0.1329
Tunisian Dinar
0.4325
0.4400
0.4338
0.4217
The following represents the estimated impact on net (loss)/income of a 10% change in the closing
rates as of March 31, 2024, and 2023 on foreign denominated financial instruments held by the Group,
with other variables such as interest rates and commodity prices held constant:
March 31, 2024
March 31, 2023
CAD $’000
CAD $’000
Euro
44
-
Tunisian Dinar
-
307
44
307
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
74
d) Commodity price risk
Commodity price risk is the risk that the fair value of future cash flows will fluctuate as a result of
changes in commodity prices.
As of March 31, 2024, a 5% change in the price of natural gas produced in Italy would represent a
change in net loss for the year ended March 31, 2024, of approximately CAD $9k (2023 – CAD $10k)
and a 5% change in the price of electricity produced in Italy would represent a change in net loss for
the year ended March 31, 2024, of approximately CAD $81k (2023 – CAD $209K). A 5% change in the
price of oil produced in Tunisia would represent a change in net loss for the year ended March 31,
2024, of approximately CAD $nil (2023 – CAD $431k)
e) Interest rate risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest
rates. The Group has fixed interest on notes payable, loans payable and convertible notes and
therefore is not currently exposed to interest rate risk.
24. Capital management
The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going
concern, so that it can continue to explore and develop its projects to provide returns for shareholders
and benefits for other stakeholders. The Group manages its working capital deficiency, long‐term debt,
and shareholders’ equity as capital.
March 31, 2024
March 31, 2023
CAD $’000
CAD $’000
Working capital
15,110
(9,383)
Long‐term debt
(438)
-
Shareholders’ equity
49,978
91,652
The Group’s cash flows from its Italian operations will be needed in the near term to finance the
operations and repay vendor loans. Once the acquisition in Tunisia will be completed and the license in
Congo will be renewed, it will be required to match the same goals. Zenith’s principal source of funds will
therefore remain the issuance of equity. The Group’s ability to raise future capital through equity is
subject to uncertainty and the inability to raise such capital may have an adverse impact on the Group’s
ability to continue as a going concern. The Group is not subject to any externally imposed capital
requirements.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
75
25. Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods
presented.
Cash
Loans due
within one
year
Loans
due after
one year
Non-
convertible
bond due
within one
year
Non-
convertible
bond due
after one
year
Total
Net debt
CAD $’000
CAD $’000
CAD
$’000
CAD $’000
CAD $’000
CAD $’000
April 1, 2022
1,153
(6,533)
(1,442)
(284)
(10,076)
(17,182)
Issue of non-
convertibles
bonds
15,156
-
-
(267)
(14,889)
-
Repayment of
non-
convertible
bonds
(551)
-
-
551
-
-
Issue of loans
5,432
-5,432
-
-
-
-
Repayment of
loans
(5,248)
3,806
1,442
-
-
-
Interest
on
loans
-
(572)
-
-
-
(572)
Foreign
exchange
-
34
`-
-
(282)
(248)
Net cash flow
(14,500)
-
-
-
-
(14,500)
March
31,
2023
1,442
(8,697)
-
-
(25,247)
(32,502)
Issue of non-
convertibles
bonds
13,643
-
-
-
(13,643)
-
Repayment of
non-
convertible
bonds
(605)
-
-
421
184
-
March 31, 2024
March 31, 2023
CAD $’000
CAD $’000
Cash and cash equivalents
207
1,442
Loans – repayable within one year
(1,870)
(8,697)
Loans – repayable after one year
(438)
-
Non-convertible bond – repayable within one year
(7,622)
-
Non-convertible bond – repayable after one year
(31,754)
(25,247)
(41,477)
(32,502)
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
76
Transfer from
current
to
non-current
-
-
-
(6,632)
6,632
-
Issue of loans
3,933
(3,495)
(438)
-
-
-
Repayment of
loans
(10,703)
10,703
-
-
-
-
Interest
on
loans
-
(152)
-
-
-
(152)
Foreign
exchange
-
(229)
-
(1,411)
320
(1,320)
Net cash flow
(7,503)
-
-
-
-
(7,503)
March
31,
2024
207
(1,870)
(438)
(7,622)
(31,754)
(41,477)
26. Operating segments
The Group’s operations are conducted in one business sector, the oil and natural gas industry.
Geographical areas are used to identify Group’s reportable segments. A geographic segment is considered
a reportable segment once its activities are regularly reviewed by the Board of the Directors.
The Group has four reportable segments which are as follows:
•
Italy, which commenced gas operations following the acquisition of assets in June 2013;
•
Tunisia, which was acquired during the 2021 FY
•
Other, which includes corporate assets and the operations in the Canadian, Swiss, Argentinian
and Norwegian entities.
YEAR 2023
Italy
Tunisia
Other
Total
CAD $000
CAD $000
CAD $000
CAD $000
Property and equipment
6,244
218,000
3,321
227,565
Other assets
1,166
20,437
13,743
35,346
Total liabilities
11,652
118,230
41,377
171,259
Capital Expenditures
5
424
1
430
Revenue
4,392
8,767
-
13,159
Operating and transportation
(1,105)
(4,546)
(99)
(5,750)
General and Administrative
(775)
(7,841)
20
(8,596)
Depletion and depreciation
(620)
(3,562)
(565)
(4,747)
Finance and other expenses
(408)
(3,649)
(2,219)
(6,276)
Taxation
(215)
(402)
-
(617)
Segment (loss)/ income
1,269
(11,233)
(2,863)
(12,827)
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
77
YEAR 2024
Italy
Tunisia
Other
Total
CAD $000
CAD $000
CAD $000
CAD $000
Property and equipment
11,302
123,058
100
134,460
Other assets
901
3,772
885
5,558
Total liabilities
12,646
33,703
43,691
90,040
Capital Expenditures
-
-
53
53
Revenue
1,787
-
1
1,788
Operating and transportation
(1,007)
14
(92)
(1,085)
General and Administrative
(652)
(4,817)
(18,932)
(24,401)
Depletion and depreciation
(334)
(3,600)
(4)
(3,938)
Finance and other expenses
(408)
(14,034)
(289)
(14,731)
Taxation
-
-
-
-
Segment loss
(614)
(22,437)
(19,316)
(42,367)
The following customers combined have 10% or more of the Group’s revenue:
2024
2023
CAD $000
CAD $000
Customer A
1,611
4,188
27.
Controlling party
At as of the end of the financial year ending March 31, 2024, the Directors do not consider there to be
a controlling party.
28.
Events subsequent to the year end
On April 11, 2024, the Company announced the successful conclusion of the Bond Exchange Offer (the
"Exchange") first announced on January 25, 2024.
The accrued interest has been paid in full to the Noteholders of the New Notes.
The total amounts exchanged were USD 3,910,000, GBP391,000 and EUR 1,542,000.
On April 22, 2024, the Company announced the launching of a new Bond Exchange Offer on revised terms (the
"Exchange") following the successful conclusion of the first Bond Exchange Offer, as publicly announced on
April 11, 2024.
The Exchange is directed to the remaining noteholders (the "Noteholders") of the following unsecured debt
instruments that matured on January 27, 2024 (collectively, the "Outstanding Notes"), to offer to exchange
(the "Exchange Offer") such Outstanding Notes into new notes issued by the Company (the "New Notes").
Non-adjusting subsequent event
The Company started negotiations to sell its Drilling Rig ZEN-260 in April 2024, that will most likely be
finalized within the next 12 months. This will be recognised as an asset held for sale under IFRS 5 post year
end and will not be depreciated. The value will be presented separately in the next statement of financial
position. In addition, the asset is available for immediate distribution and the event is highly probable.
Zenith Energy Ltd.
Annual Report & Financial Statements
For the Year Ended March 31, 2024
78
The disposal of this equipment will not change the nature of the Company’s investment in Italy and the
expected financial effect will be an increase of up to Euro 3,589,00 (CAD$ 5,244,457) in the liquidity available,
being the result of the selling price 3,700,000 (CAD$ 5,406,775) net of 3% commission for selling agent.