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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Prospex Energy Plc | AQSE:PXEN.GB | Aquis Stock Exchange | Ordinary Share | GB00BMFZVZ53 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 8.75 | 8.00 | 9.50 | 9.35 | 7.45 | 8.75 | 290,503 | 14:03:01 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMPXEN
RNS Number : 0247M
Prospex Energy PLC
19 May 2022
Prospex Energy PLC / Index: AIM / Epic: PXEN / Sector: Oil and Gas
19 May 2022
Prospex Energy PLC
('Prospex' or the 'Company')
AGM Notice and Final Results for Year ended 31 December 2021
-Successfully transitioned from an explorer to a gas producing, electricity
and income generating investing company
Prospex Energy plc, the AIM quoted investment company, is pleased to announce its audited Final Results for the year ended 31 December 2021.
Highlights
-- El Romeral
o Acquisition of the El Romeral gas producing licenses and gas power plant. Prospex holds a 49.9% working interest in El Romeral through its interest in Tarba Energía S.L. ("Tarba")
o Tarba Transitioned from exploration company to a significant gas producing, electricity generating and income generating company
o El Romeral plant is running 24 hours a day 7 days a week following optimisation and automation carried out by Tarba at the end of 2021
-- The Selva field
o The Selva field received full environmental approval from Italy's Ecological Transition Ministry for production development with the final Environmental Impact Assessment ('EIA') decree
o Full production licence for Selva expected in the second quarter of 2022
o Increased its stake in the Selva field in Italy to 37%
Corporate and Financial Highlights (as at 31 December)
-- Total Assets of GBP8,984,437 (2020: GBP5,748,211) - increase of 56% -- Successfully raised GBP750,000 gross via an oversubscribed placing -- Cash and cash equivalents of GBP220,060 (2020: GBP220,618)
o Subsequent to year end, Company completed a placing of GBP2.455m
-- Fair value of the Company's investments stood at GBP6,697,305 (2020: GBP3,620,890)
-- Strengthened management team with the appointment of Mark Routh as CEO and Alasdair Buchanan as Non-Executive Director
The Company also gives notice that its Annual General Meeting ('AGM') will be held at the offices of Shakespeare Martineau LLP, 6th Floor 60 Gracechurch Street, London, United Kingdom, EC3V 0HR at 11.00 a.m. on 15 June 2022. The Financial Results for the year ended 31 December 2021 ('Accounts') together with the Notice of AGM will be available to download today from the Company's website and will also be posted to shareholders on or around 20 May 2022.
Commenting on the results, Mark Routh, Prospex's CEO, said:
"It has been a transformational year for Prospex as we transitioned from being an investing company with interests in exploration assets to a company including interests in a gas producing and electricity generating asset. We have invested in the optimisation and automation of El Romeral enabling it to run 24 hours a day 7 days a week and allowing us to benefit from the unprecedented rise in electricity prices. In addition, our successful fundraising earlier in this year, enabled us to increase our stake in Selva to 37%, where a full production licence is anticipated during 2022.
"Looking ahead, w ith Selva expected to commence production in Q2-2023 and with the application process now commenced for a multi-well drilling programme at El Romeral, potentially in 2023, the year ahead promises to see major progress. Prospex is in a strong operational position with an experience team who remain committed to increase shareholder value."
* *S * *
For further information visit www.prospex.energy or contact the following:
Mark Routh Prospex Energy PLC Tel: +44 (0) 20 7236 1177 Ritchie Balmer Strand Hanson Limited Tel: +44 (0) 20 7409 Rory Murphy 3494 Andrew Monk (Corporate Broking) VSA Capital Limited Tel: +44 (0) 20 3005 Andrew Raca/Alex Cabral 5000 (Corporate Finance) Colin Rowbury Novum Securities Tel: +44 (0) 20 7399 Jon Belliss Limited 9427 Susie Geliher St Brides Partners Tel: +44 (0) 20 7236 Ana Ribeiro Limited 1177
Chairman's Report for the year ended 31 December 2021
The 2021 financial year saw significant changes to Prospex Energy.
On 1 March 2021, Tarba Energía S.L. ('Tarba'), the joint venture vehicle in which Prospex, via its wholly owned subsidiary PXOG Muirhill Ltd, holds its Spanish investments, completed the acquisition of the El Romeral gas producing licenses and gas to power plant near Carmona in southern Spain, thus transitioning from an exploration company to a significant gas producing, electricity generating and therefore an income generating company. The El Romeral asset produces gas to a power station selling electricity into the Spanish grid. Following much preparation, the plant and its employees seamlessly transferred over to Tarba, production hours were increased, and all operations have been without incident. Tarba, with collaboration from its shareholders has continued to review operations, both above and below ground at El Romeral. Two of the three generators at the power plant currently operate alternately, and work is planned to recommission the third generator in preparation for increased gas production expected from the future infill well drilling campaign. The permitting process for the El Romeral infill wells is underway with applications having been submitted, however there is no defined timeline for the government to respond. Tarba and its shareholders continue to actively progress this.
In March 2021, the Selva field joint venture in Italy, held by Prospex via its wholly owned subsidiary PXOG Marshall Ltd, received the full environmental approval from Italy's Ecological Transition Ministry for production development at the Selva field with the final Environmental Impact Assessment ('EIA') decree. This paved the way for the grant of a full production licence from Italy's Economic Development Ministry. The Operator, Po Valley Energy Limited, continues to pursue the various strands that support its application for a full production licence for Selva which is currently expected in the second quarter of 2022. This includes applying for an INTESA (intergovernmental agreement) between the regional and national governments, which is a standard development procedure for onshore gas fields in Italy.
Prior to Spain's Act on Climate Change and Energy Transition (7/2021) coming into force on 22 May 2021, Tarba submitted an application to convert the vast majority of the existing Tesorillo Project exploration permit into an exploitation concession. This application was submitted to the MITECO on 12 May 2021 together with a field development plan for approval. The outcome of this application will not be known for some time. Whilst the new act states that no new hydrocarbon permits or licences will be granted in Spain, it specifically excluded existing permits. It has been confirmed that applications from existing permits prior to the Climate Change Act coming into force maintain their validity under the new law. The El Romeral exploitation concessions at which Tarba operates its gas to power plant are in force and are unaffected by the Climate Change Act.
The Tarba team continues to liaise with various government agencies to progress drilling and environmental approvals for both El Romeral and Tesorillo. Tarba is targeting conventional sandstone gas reservoirs. There are no financial or drilling commitments attached to the Tesorillo Project Exploitation Concession application and, pending the decision by the regulators, no work is scheduled and the existing Tesorillo permit remains suspended.
In July 2021, Mark Routh was appointed as Prospex Energy's new CEO and director following votes received at the AGM to make changes to the Board of Directors.
In August 2021, Alasdair Buchanan was appointed as a non-executive director.
On 8 August 2021, Prospex agreed to purchase an additional 20% of the Selva field in Italy from United Oil & Gas plc, increasing Prospex's share of the Selva joint venture from 17% to 37%. (The acquisition was completed on 8 April 2022.)
An Extraordinary General Meeting was convened on 5 October 2021 at the request of a group of shareholders proposing the replacement of the entire Board of Directors. Shareholders voted to support the current Board of Directors by 59% versus 41% of the votes cast. Subsequently the CEO has increased communications with all shareholders and the Board believes there is improved alignment on objectives and strategy of the Company going forward.
In October 2021, Tarba undertook field work including workovers and a data acquisition campaign executed on three of the El Romeral gas wells.
In December 2021, in Italy, a seismic and subsidence monitoring programme commenced at the Selva field in order to comply with the requirement to complete a full 12 months of monitoring before gas production may commence. This monitoring programme will be completed by December 2022.
In December 2021, Tarba completed a plant optimisation and automation project at El Romeral to allow remote monitoring and control of the plant, allowing reduced manual intervention and providing the ability to run the plant 24 hours a day 7 days a week. Further studies have been conducted and, at the date hereof, the plant is running 24 hours a day 7 days a week.
Also in December 2021, Tarba re-paid EUR300,000 of its El Romeral loan to its shareholders Prospex and Warrego (Net proceeds to PXEN EUR149,700). The remaining balance of this loan and interest was subsequently repaid on 28 April 2022 (Net to PXEN EUR144,499 plus interest)
Financial Review
For the year ended 31 December 2021, the Company is reporting Total Assets of GBP8,984,437 (2020: GBP5,748,211), the value of which largely comprises the Company's investment in PXOG Marshall Ltd, the vehicle for the Company's Italian assets. The 56% increase is dominated by a revaluation reflecting measured recognition of positive changes in the forward curve of European gas prices at 31 December 2021 and includes revaluations of the Company's investments ('the Investments') as well as repayments and advances on loans receivable from those investments. Unrealised gains arising on revaluation of Investments at fair value amounted to GBP3,076,415 (2020: unrealised loss GBP1,121,815).
In March 2021, the Company raised GBP750,000 gross via an oversubscribed placing primarily to fund the planned programmes at El Romeral and the Podere Gallina licence.
In June 2021, the Company refinanced 83% of its outstanding 2018 Loan Notes. GBP321,681 of the then GBP386,017 outstanding loan notes were rolled over into the 2021 Loan note instrument, whilst increasing the interest rate to 12% the repayment dates have been extended by 18 months. At the time of issue in 2018, the repayment obligation was based on what was then the anticipated commencement of gas production at Selva, which has been delayed by a number of uncontrollable factors, but with the recent progress made by the Operator, is now anticipated to take place in Q2 2023.
As at 31 December 2021, the fair value of the Company's investments stood at GBP6,697,305 (2020: GBP3,620,890). The combined value of these equity investments, current and non-current loans is GBP8,726,484 (2020: GBP5,383,880). The current year figures include a non-refundable deposit of 5% of the purchase consideration for United Oil and Gas plc's 20% interest in the Selva field in Italy (the acquisition was completed subsequent to year-end). The Company continues to have significant asset backing relative to its market capitalisation.
Administrative expenses for the full year totalled GBP891,676, an 8% reduction from 2020's GBP972,193, as management took steps to reduce the Company's cost base.
As at 31 December 2021, the Company held cash and cash equivalents of GBP220,060 (2020: GBP220,618).
Post period end, in February 2022, the Company raised GBP2.455 million (before expenses) by way of a placing of 70,137,143 new ordinary shares of 0.1p each in the Company at a price of 3.50 pence per share. The net proceeds of the placing have been used to complete the acquisition of 20% of the Selva Field in Italy, increasing the Company's ownership from 17% to 37%, and to contribute towards the funding of the Selva development and general working capital requirements. All directors participated in the placing.
Outlook
With the current shortage of gas across Europe, markets have experienced historically high gas and electricity prices. The Prospex Board recognises that energy prices seen since the end of 2021 are not sustainable in the long term, so, whilst benefiting from the increased demand and pricing, Prospex has continued to apply a conservative approach when looking at forward energy prices in the valuation of its assets.
In the current environment, governments are rightly taking steps to find alternative energy sources, improve energy security and reduce energy costs to end consumers. Prospex is well positioned to contribute positively in all these areas. To put this in context, local indigenous onshore gas production in Spain has a carbon footprint which is ten times lower than the importation of LNG from the USA, and at a substantially lower delivered cost. With this in mind, Prospex intends to grow its gas production assets and simultaneously become a model for the energy transition process.
Prospex supports the drive to renewable energy and is actively pursuing ways of developing these sources. However, we also recognise that natural gas will be required to contribute to the energy mix during the transitional period, and that local indigenous onshore gas is the optimum source to meet this need. With the strength of our team and our assets, Prospex is well positioned to grow its business into these market opportunities.
The outlook for Prospex is one of consolidation and growth. With Selva expected to commence production in Q2-2023 and with the application process now commenced for a multi-well drilling programme at El Romeral, potentially in 2023, the year ahead promises to see major progress. I look forward to providing further updates as developments occur.
Following the Annual General Meeting of shareholders in July 2021, the team leading your Company included Mark Routh as CEO and a director and Alasdair Buchanan as a non-executive director. These two individuals bring a significant depth of experience to the Board and management and have a thorough understanding of the existing assets and joint venture partners as well as bringing skills and experience to implementing new opportunities. Ed Dawson, former Managing Director and a founder of the Company was instrumental in building the asset base of the Company in Italy and Spain. James Smith, a former non-executive director, contributed technical strength and governance experience to the Board. I would like to extend my thanks to Ed and James for the considerable work they put in to establishing the strong platform for growth that Prospex enjoys today.
Finally, I would like to thank the Board and management team for their continued hard work, commitment and support.
Bill Smith
Non-executive Chairman
19 May 2022
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR.
Prospex Energy Plc
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2021
2021 2020 Notes GBP GBP ------------------------------------------- ------ ---------------- -------------------- CONTINUING OPERATIONS Other operating income 5 86,604 247,143 Administrative expenses (891,676) (972,193) ------------------------------------------- ------ ---------------- -------------------- OPERATING LOSS (805,072) (725,050) 12, Gain/(loss) on revaluation of investments 13 3,076,415 (1,121,815) ------------------------------------------- ------ ---------------- -------------------- 2,271,343 (1,846,865) Finance income 7 109,618 91,362 Finance costs 7 (80,771) (50,989) ------------------------------------------- ------ ---------------- -------------------- PROFIT/(LOSS) BEFORE INCOME TAX 8 2,300,190 (1,806,492) Income tax 9 (40,394) - ------------------------------------------- ------ ---------------- -------------------- PROFIT/(LOSS) FOR THE YEAR 2,259,796 (1,806,492) ------------------------------------------- ------ ---------------- -------------------- EARNINGS/(LOSS) PER SHARE 10 Basic earnings/(loss) pence per share 1.61p (2.10)p Diluted earnings/(loss) pence per share 1.61p (2.10)p ------------------------------------------- ------ ---------------- --------------------
Prospex Energy Plc (Registered number: 03896382)
Statement of Financial Position
31 December 2021
2021 2020 Notes GBP GBP ASSETS NON-CURRENT ASSETS Property, plant and equipment 11 - - Investments 12 6,697,305 3,620,890 Loans and other financial assets 13 - - Trade and other receivables 14 1,225,570 989,645 --------------------- ---------------------- 7,922,875 4,610,535 ----------------------------------------- ------ --------------------- ---------------------- CURRENT ASSETS Trade and other receivables 14 841,502 917,058 Cash and cash equivalents 15 220,060 220,618 1,061,562 1,137,676 ----------------------------------------- ------ --------------------- ---------------------- TOTAL ASSETS 8,984,437 5,748,211 ----------------------------------------- ------ --------------------- ---------------------- EQUITY SHAREHOLDERS' EQUITY Called up share capital 16 7,124,355 7,035,589 Share premium 11,599,333 10,185,819 Merger reserve 2,416,667 2,416,667
Capital redemption reserve 43,333 43,333 Fair value reserve 6,067,267 - Retained earnings (18,748,005) (14,965,030) ----------------------------------------- ------ --------------------- ---------------------- TOTAL EQUITY 8,502,950 4,716,378 ----------------------------------------- ------ --------------------- ---------------------- LIABILITIES NON-CURRENT LIABILITIES Financial liabilities - borrowings - Interest bearing loans and borrowings 18 247,232 579,998 Deferred taxation 19 40,394 - ----------------------------------------- ------ --------------------- ---------------------- 287,626 579,998 ----------------------------------------- ------ --------------------- ---------------------- CURRENT LIABILITIES Trade and other payables 17 52,892 164,262 Financial liabilities - borrowings - Interest bearing loans and borrowings 18 140,969 287,573 ----------------------------------------- 193,861 451,835 ----------------------------------------- ------ --------------------- ---------------------- TOTAL LIABILITIES 481,487 1,031,833 ----------------------------------------- ------ --------------------- ---------------------- TOTAL EQUITY AND LIABILITIES 8,984,437 5,748,211 ----------------------------------------- ------ --------------------- ----------------------
The financial statements were approved by the Board of Directors and authorised for issue on 19 May 2022 and were signed on its behalf by:
Mark Routh
Director
Prospex Energy Plc
Statement of Changes in Equity
for the year ended 31 December 2021
Capital Fair Share Share Merger redemption value Retained capital premium reserve reserve reserve earnings Total GBP GBP GBP GBP GBP GBP GBP Balance at 1 January 2020 6,435,587 10,095,358 2,416,667 43,333 - (13,260,713) 5,730,232 Changes in equity Profit for the year - - - - - (1,806,492) (1,806,492) Issue of shares 600,002 119,998 - - - - 720,000 Costs of shares issued - (29,537) - - - - (29,537) Lapse of share options - - - - - - - Equity-settled share-based payments - - - - - 102,175 102,175 Balance at 31 December 2020 7,035,589 10,185,819 2,416,667 43,333 - (14,965,030) 4,716,378 ---------------- ----------- -------------- -------------- ------------- ---------- -------------- ------------ Changes in equity Profit for the year - - - - - 2,259,796 2,259,796 Issue of shares 88,766 1,492,910 - - - - 1,581,676 Costs of shares issued - (54,900) - - - - (54,900) Lapse of share options - - - - - - - Equity-settled share-based payments - (24,496) - - - 24,496 - Transfer to fair value reserve - - - - 6,067,268 (6,067,268) - Balance at 31 December 2021 7,124,355 11,599,333 2,416,667 43,333 6,067,268 (18,748,006) 8,502,950 ---------------- ----------- -------------- -------------- ------------- ---------- -------------- ------------
Share capital - The nominal value of the issued share capital
Share premium account - Amounts received in excess of the nominal value of the issued share capital less costs associated with the issue of shares
Merger reserve - The difference between the nominal value of the share capital issued by the Company and the fair value of the subsidiary at the date of acquisition
Capital redemption reserve - The amounts transferred following the redemption or purchase of the Company's own shares
Retained earnings - Accumulated comprehensive income for the year and prior periods
Fair value reserve - the cumulative fair value changes of the company's fixed asset investment, net of deferred tax
Prospex Energy Plc
Statement of Cash Flows
for the year ended 31 December 2021
2021 2020 Notes GBP GBP -------------------------------------------- ------ -------------------- ------------------ Cash outflow from operations 1 (941,242) (1,106,861) -------------------------------------------- ------ -------------------- ------------------ Cash flows from investing activities Interest paid (106,722) (51,664) -------------------------------------------- ------ -------------------- ------------------ Net cash outflow from investing activities (106,722) (51,664) -------------------------------------------- ------ -------------------- ------------------ Cash flows from financing activities New loan notes - 265,000 Bank loan (repayment)/receipt (7,238) 49,632 Loan (payment)/repayments (56,294) 304,661 Share issue 1,165,838 720,000 Costs of shares issued (54,900) (29,537) -------------------------------------------- ------ -------------------- ------------------ Net cash inflow from financing activities 1,047,406 1,309,756 -------------------------------------------- ------ -------------------- ------------------ (Decrease)/increase in cash and cash equivalents (558) 151,231 Cash and cash equivalents at beginning of year 2 220,618 69,387 -------------------------------------------- ------ -------------------- ------------------ Cash and cash equivalents at end of year 2 220,060 220,618 -------------------------------------------- ------ -------------------- ------------------
Non - Cash Movements
During the year GBP415,838 non-cash movements related to the conversion of loan notes to ordinary shares (note 12)
Prospex Energy Plc
Notes to the Statement of Cash Flows
for the year ended 31 December 2021
1. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS 2021 2020 GBP GBP ------------------------------------------ -------------------- ------------------ Cash flows from operations Profit/(loss) before income tax 2,300,190 (1,806,492) (Gain)/loss on revaluation of fixed asset investments (3,076,415) 377,498 Provision against loan to subsidiary undertaking - 744,317 Finance income (109,618) (91,362) Finance costs 80,771 50,989 ------------------------------------------- -------------------- ------------------ Operating loss (805,072) (725,050) Increase in trade and other receivables (50,751) (590,204) (Decrease)/increase in trade and other payables (85,419) 67,968 Equity settled share-based payments - 102,175 Issue of loan note to settle liabilities - 38,250 ------------------------------------------- -------------------- ------------------ Net cash outflow from operations (941,242) (1,106,861) ------------------------------------------- -------------------- ------------------ 2. CASH AND CASH EQUIVALENTS
The amounts disclosed on the Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts:
Year ended 31 December 2021 31.12.21 01.01.21 GBP GBP ----------------------------- --------- ----------- Cash and cash equivalents 220,060 220,618 ------------------------------ --------- ----------- Year ended 31 December 2020 31.12.20 01.01.20 GBP GBP --------- ----------- Cash and cash equivalents 220,618 69,387 ------------------------------ --------- -----------
Prospex Energy Plc
Notes to the Financial Statements
for the year ended 31 December 2021
1. STATUTORY INFORMATION
Prospex Energy Plc is a public limited company, is registered in England and Wales and is quoted on the AIM Market of the London Stock Exchange Plc. The Company's registered number and registered office address can be found on the Company Information page.
The presentation currency of the financial statements is the Pound Sterling (GBP).
2. ACCOUNTING POLICIES
Basis of preparation
The Company's financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 as they apply to the financial statements of the Company for the year ended 31 December 2021 and as applied in accordance with the provisions of the Companies Act 2006.
The Company financial statements have been prepared under the historical cost convention or fair value where appropriate.
Preparation of consolidated financial statements
The Company is an investment entity and, as such, does not consolidate the investment entities it controls. The Company's interests in subsidiaries are recognised at fair value through profit and loss.
Going concern
The current economic environment is challenging, and the Company has reported an operating loss for the year of GBP805,072. These losses are expected to continue in the current accounting year to 31 December 2022.
The Company regularly carries out fund-raising exercises in order that it can provide the necessary working capital and investment funds for the Company. As detailed in note 25, since the year end, the Company has raised GBP2.455 million before expenses, through the issue of new ordinary shares. The net proceeds of which were used to complete the acquisition of a further 20% of the Podere Galina licence for total consideration of EUR2,164,701 and a working capital adjustment of EUR134,500. The board expects to continue to be able to raise additional funding as and when required to cover the Group's development, primarily from the issue of further shares, or, if available on suitable terms, debt finance.
The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Company together with known receivables will be sufficient to support the current level of activities into the third quarter of 2022. The Company's asset in Spain is fully self-funding and is expected to have sufficient of its own cash resources to fund ongoing operations and development work until the end of 2023. Should the Italian asset be granted a production permit, then funding will need to be obtained to fund the development expenditure required prior to production commencing. The Directors are continuing to explore sources of finance available to the Company and based upon initial discussions with a number of existing and potential investors they have a reasonable expectation that they will be able to secure sufficient cash inflows for the Company to continue its activities for not less than 12 months from the date of approval of these financial statements; they have therefore prepared the financial statements on a going concern basis.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
2. ACCOUNTING POLICIES - continued
Property, plant and equipment
Depreciation is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated useful life.
Computer equipment - 25% per annum on reducing balance
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet when the Company becomes a party to the contractual provisions of the instrument.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The principal financial assets of the Company are loans and receivables, which arise principally through the provision of goods and services to customers (e.g. trade receivables) but also incorporate other types of contractual monetary asset. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.
The Company's loans and receivables are recognised and carried at the lower of their original amount less an allowance for any doubtful amounts. An allowance is made when collection of the full amount is no longer considered possible.
The Company's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.
Equity comprises the following:
- Share capital represents the nominal value of equity shares;
- Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue;
- Profit and loss reserve represents retained deficit;
- The capital redemption reserve arises on redemption of shares in previous years and own share reserve;
- Merger reserve represents the difference between the nominal value of the share capital issued by the Company and the fair value of the subsidiary at the date of acquisition;
- Fair value reserve represents the cumulative fair value changes of the company's fixed asset investment, net of deferred tax.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
2. ACCOUNTING POLICIES - continued
Leases
Leases are recognised as finance leases. The lease liability is initially recognised at the present value of the lease payments which have not yet been made and subsequently measured under the amortised cost method. The initial cost of the right-of-use asset comprises the amount of the initial measurement of the lease liability, lease payments made prior to the lease commencement date, initial direct costs and the estimated costs of removing or dismantling the underlying asset per the conditions of the contract.
Where ownership of the right-of-use asset transfers to the lessee at the end of the lease term, the right-of-use asset is depreciated over the asset's remaining useful life. If ownership of the right-of-use asset does not transfer to the lessee at the end of the lease term, depreciation is charged over the shorter of the useful life of the right-of-use asset and the lease term.
Taxation
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is determined using tax rates that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised, or the deferred tax liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and short-term deposits with an original maturity of three months or less.
Trade and other payables
Trade and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.
Foreign currency translation
Items included in the Financial Statements are measured using the currency of the primary economic environment in which the Company operates (the functional currency) which is UK sterling (GBP). The Financial Statements are accordingly presented in UK Sterling.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or at an average rate for a period if the rates do not fluctuate significantly. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Profit or Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Finance income and finance costs
Finance income is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. It is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable.
Borrowing costs are recognised as an expense in the period in which they are incurred.
Equity-settled share-based payment
The Company makes equity-settled share-based payments. The fair value of options granted is recognised as an expense, with a corresponding increase in equity. The fair value is measured at grant date and spread over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. The fair value of the options granted is measured based on the Black-Scholes framework, taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date, the Company revises its estimate of the number of options that are expected to become exercisable. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
Government grants
Grants that compensate the Company for expenses incurred are recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
2. ACCOUNTING POLICIES - continued
Accounting standards issued but not yet effective and/or adopted
As at the date of approval of these financial statements, the following standards were in issue but not yet effective. These standards have not been adopted early by the Company as they are not expected to have a material impact on the Company's financial statements.
Effective date (period beginning on or after) --------------------- ----------------------------------------------------- -------------- IFRS 1 Amendments - First-Time Adoption of International 01/01/2022 Financial Reporting Standards - Subsidiary as a first-time adopter IFRS 9 Amendment - Financial Instruments - Fees in 01/01/2022 the '10 per cent' test for derecognition of financial liabilities IFRS 16 Leases - Lease incentives 01/01/2022 IAS 16 Amendments - Property, Plant and Equipment - 01/01/2022 Proceeds before Intended Use IFRS 3 Amendments - Reference to the Conceptual Framework 01/01/2022 IAS 37 Onerous Contracts - Cost of Fulfilling a Contract 01/01/2022 IFRS 17 Insurance contracts 01/01/2023 IFRS 4 Amendments - Applying IFRS 9 'Financial Instruments' 01/01/2023 with IFRS 4 'Insurance Contracts' IAS 1 Amendment - Correction of Liabilities as Current 01/01/2023 and Non-Current IAS 1, IFRS Practice Amendment - Disclosure of accounting policies 01/01/2023 Statement 2 IAS 8 Amendment - Definition of Accounting estimates 01/01/2023 IAS 12 Amendment - Deferred Taxation related to Assets 01/01/2023 and Liabilities arising from a Single Transaction IFRS 17, IFRS 9 Amendment - Comparative Information 01/01/2023 --------------------- ----------------------------------------------------- --------------
The International Financial Reporting Interpretations Committee has also issued interpretations which the Company does not consider will have a significant impact on the financial statements.
Revenue recognition
Revenue is measured at the fair value of consideration receivable, net of any discounts and VAT. It is recognised to the extent that the transfer of promised services to a customer has been satisfied and the revenue can be reliably measured.
Revenue from the rendering of services to the customer is considered to have been satisfied when the service has been undertaken.
Revenue which is not related to the principal activity of the Company is recognised in the Statement of Profit or Loss as other operating income. Such income includes consultancy fees and rent receivable.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the financial information in conformity with IFRS requires the use of certain critical accounting estimates that affect the reported amounts of assets and liabilities at the date of the financial information and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual results ultimately may differ from these estimates. The estimates and underlying assumptions are as follows:
Investment entities
The judgements, assumptions and estimates involved in the Company's accounting policies that are considered by the Board to be the most important to the portrayal of its financial condition are the fair valuation of the investment and the assessment regarding investment entities. The investment portfolio is held at fair value. The Directors review the valuations policies, process and application to individual investments.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY - continued
Entities that meet the definition of an investment entity within IFRS 10 are required to account for most investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit and loss. The Board has concluded that the Company continues to meet the definition of an investment entity as its strategic objective of investing in portfolio investments for the purpose of generating returns in the form of investment income and capital appreciation remains unchanged
Fair value is the underlying principle and is defined as "the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date". Fair value is therefore an estimate and, as such, determining fair value requires the use of judgement. The quoted assets in our portfolio are valued at their closing bid price at the balance sheet date. The largest investment in the portfolio, however, is represented by an unquoted investment.
Impairment of assets
The Company's principal investments are in wholly owned unquoted subsidiaries which each have a minority interest in overseas entities with energy assets.
The Company is required to test, on an annual basis, whether its non-current assets have suffered any impairment. Determining whether these assets are impaired requires an estimation of the value in use of the cash-generating units to which the assets have been allocated. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate to calculate the present value. Subsequent changes to the cash generating unit allocation or to the timing of cash flows could impact on the carrying value of the respective assets.
The calculation of value-in-use for energy assets under development or in production is most sensitive to the following assumptions:
- Commercial reserves
- production volumes;
- commodity prices;
- fixed and variable operating costs;
- capital expenditure; and
- discount rates.
A potential change in any of the above assumptions may cause the estimated recoverable value to be lower than the carrying value, resulting in an impairment loss. The assumptions which would have the greatest impact on the recoverable amounts of the fields are production volumes and commodity prices
Recoverability of other financial assets
The majority of the Company's financial assets represent loans provided to its subsidiaries, which are associated with funding of mineral exploration and development projects. The recoverability of such loans is dependent upon the discovery of economically recoverable reserves, the ability of the Company to maintain necessary financing to complete the development of the reserves and future profitable production or proceeds from the disposition thereof.
Share based payments
The estimates of share-based payments requires that management selects an appropriate valuation model and make decisions on various inputs into the model including the volatility of its own share price, the probable life of the options before exercise and behavioural consideration of employees.
Deferred tax assets
Deferred taxation is provided for using the liability method. Deferred tax assets are recognised in respect of tax losses where the Directors believe that it is probable that future profits will be relieved by the benefit of tax losses brought forward. The Board considers the likely utilisation of such losses by reviewing budgets and medium-term plans for the Company. The Directors have decided that no deferred tax asset should be recognised at 31 December 2021. If the actual profits earned by the Company differs from the budgets and forecasts used then the value of such deferred tax assets may differ from that shown in these financial statements.
4. REVENUE
Segmental reporting
The Company is an Investing Company. The results for this continuing operation, all of which were carried out in the UK, are disclosed in the Income Statement. The net assets as at 31 December 2021 as shown on the Statement of Financial Position all relate to the Investment activity.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
5. OTHER OPERATING INCOME 2021 2020 GBP GBP ------------------- ---------------- ----------------- Consultancy fees 29,150 128,275 Government grants 57,454 118,868 -------------------- ---------------- ----------------- 86,604 247,143 ------------------- ---------------- ----------------- 6. EMPLOYEES AND DIRECTORS 2021 2020 GBP GBP ------------------------------- -------------------- ------------------ Wages and salaries 460,249 397,150 Social security costs 49,550 42,693 Other pension costs 21,395 22,711 Costs of share-based payments - 102,175 -------------------------------- -------------------- ------------------ 531,194 564,729 ------------------------------- -------------------- ------------------
The average number of employees during the year was as follows:
2021 2020 Number Number ----------- --------------------- --------------------- Directors 6 4 Staff 4 4 10 8 ----------- --------------------- ---------------------
Under the Pensions Act 2008, every employer must put certain staff into a pension scheme and contribute to it. The Company auto-enrolled its eligible employees in a defined contribution scheme. The charge to the Statement of Profit or Loss represents the amounts paid to the scheme. At the year end, the amount due to the pension scheme was GBPnil (2020: GBPnil).
Details of Directors' remuneration can be found in note 24.
7. NET FINANCE COSTS 2021 2020 GBP GBP ----------------------------------- ------------------ --------------------- Finance income Interest receivable on group loan 109,618 91,362 ------------------------------------ ------------------ --------------------- Finance costs Loan interest payable 70,211 50,969 Bank loan interest 1,375 - Other interest payable 1,333 - Interest on overdue tax 7,852 20 ------------------------------------ ------------------ --------------------- 80,771 50,989 ----------------------------------- ------------------ --------------------- Net finance income 28,847 40,373 ------------------------------------ ------------------ --------------------- 8. PROFIT/LOSS BEFORE INCOME TAX
The profit/loss before income tax is stated after charging:
2021 2020 GBP GBP ------------------------------ ------------------ ------------------- Other operating leases 9,744 93,913 Auditors' remuneration 25,000 24,060 Foreign exchange differences 3,743 287 ------------------------------- ------------------ -------------------
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
9. INCOME TAX 2021 2020 GBP GBP Current tax charge UK corporation tax on profit for the period at 19% (2020: 19%) - - Deferred taxation 40,394 - -------------------------------------------------------------- ---------------------- ------- Tax charge for the year 40,394 - -------------------------------------------------------------- ---------------------- -------
Factors affecting the tax expense
The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:
2021 2020 GBP GBP Factors affecting the tax charge for the year: Profit/(loss) before income tax 2,300,190 (1,806,492) ------------------------------------------------------- --------------- ------------------- Profit/loss before income tax multiplied by effective rate of UK corporation tax of 19.00% (2020: 19.00%) 437,036 (343,233) ------------------------------------------------------- --------------- ------------------- Effects of Non-deductible expenses (3,366) 19,289 Losses used for group relief 1,792 30,284 Tax losses not utilised 149,057 80,515 Unrealised chargeable losses (584,519) 213,145 Deferred taxation 40,394 - ------------------------------------------------------- --------------- ------------------- (396,642) 343,233 ------------------------------------------------------- --------------- ------------------- Current tax charge 40,394 - ------------------------------------------------------- --------------- -------------------
There is no provision for UK Corporation Tax due to adjusted losses for tax purposes, subject to agreement with HM Revenue and Customs. The deferred tax asset, measured at the standard rate of 25%, of approximately GBP1.9m (2020: 19% - GBP1.3m) arising from the accumulated tax losses of approximately GBP7.6m (2020: GBP6.9m) carried forward has not been recognised but may become recoverable against future trading profits, subject to agreement with HMRC.
The main UK corporation tax rate is to change from 19% to 25% with effect from 1 April 2023. The deferred tax liability arising on the revaluation of the Company's fixed asset investments has been calculated using 25%, reduced by the availability of tax losses brought forward.
10. EARNINGS/LOSS PER SHARE 2021 2020 GBP GBP Profit/(loss) for the financial period 2,259,796 (1,806,492) ------------------------------------------------- ---------------- ---------------------- Weighted average number of shares for basic EPS 140,431,111 85,855,239 Potentially dilutive share options and warrants 200,265 - ------------------------------------------------ ---------------- ---------------------- Weighted average number of Ordinary Shares
for diluted EP 140,631,376 85,855,239 ------------------------------------------------- ---------------- ---------------------- Basic earnings/(loss) per share 1.61p (2.10)p ------------------------------------------------- ---------------- ---------------------- Diluted earnings/(loss) per share 1.61p (2.10)p ------------------------------------------------- ---------------- ----------------------
The exercisable share options and warrants are deemed to be dilutive in nature where their exercise price is less than the average share price for the period .
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
11. PROPERTY, PLANT AND EQUIPMENT Computer equipment GBP COST At 1 January 2020 and 2021 and 31 December 2021 1,699 -------------------------------------- -------------------- DEPRECIATION At 1 January 2020 and 2021 and 31 December 2021 1,699 -------------------------------------- -------------------- NET BOOK VALUE At 31 December 2021 - -------------------------------------- -------------------- At 31 December 2020 - -------------------------------------- -------------------- 12. INVESTMENTS Shares Unlisted Total in group investments undertakings GBP GBP GBP COST OR VALUATION At 1 January 2020 3,948,388 50,000 3,998,388 Revaluations (377,498) - (377,498) --------------------- --------------- ------------------- --------------- At 31 December 2020 3,570,890 50,000 3,620,890 Revaluations 3,076,415 - 3,076,415 At 31 December 2021 6,647,305 50,000 6,697,305 --------------------- --------------- ------------------- ---------------
Shares in group undertakings represent investments in PXOG Marshall Limited of GBP6,647,205 (2020: GBP3,570,790) and PXOG Muirhill Limited of GBP100 (2020; GBP100)
The Company's investments at the Statement of Financial Position date in the share capital of companies include the following:
PXOG Massey Limited Registered office: Stonebridge House, Chelmsford Road, Hatfield Heath, Essex CM22 7BD Nature of business: Investment entity % holding Class of shares: Ordinary shares 100.00 2021 2020 GBP GBP Aggregate capital and reserves 732,218 722,784 Profit for the year 9,434 926,489 --------------------------------------- ---------------- ---------------- ---------------
The investment in PXOG Massey Limited is held at GBPnil, based on the SPA agreement which is pending completion of sale to H2Oil Limited. In August 2020, Prospex signed a sale and purchase agreement ('SPA') with H2Oil Limited ('H2Oil') regarding the sale of the entire issued share capital of PXOG Massey Limited ('Massey'). Under the terms of the SPA, the Company will receive up to GBP215,000 in cash in respect of historical debt owed to the Company by Massey and nominal consideration for shares in Massey of which 85% of the funds (GBP182,650) had been received by Prospex by 31 December 2020. As at the balance sheet date, although it is still expected, the final condition of the SPA had not been met.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
12. INVESTMENTS - continued PXOG Marshall Limited Registered office: 60 Gracechurch Street, London EC3V 0HR Nature of business: Investment entity % holding Class of shares: Ordinary shares 100.00 2021 2020 GBP GBP Aggregate capital and reserves 6,647,205 2,570,790 Profit/(loss) for the year 3,076,415 (377,498) --------------------------------------- ---------------- ---------- ---------- The underlying value of PXOG Marshall Limited is based on the underlying value of the Podere Gallina permit, Po Valley, Italy, of which it owned 17% at the year end. Consistent with prior years, a discounted cash flow ("DCF") model was produced at the year end, based on proved and probable (2P) reserves supported by a Competent Person Report (CPR) produced in April 2019. The DCF model has been updated to reflect forward gas prices as at 31 December 2021 using the Dutch TTF Gas Futures contracts for 2023 and subsequent production years, reduced for price volatility. The DCF cashflows were discounted at 10% p.a. In addition, consistent with the prior year, a risked valuation of 2C contingent resources in the Selva North and South fields in the 2019 CPR has been updated and included. PXOG Muirhill Limited Registered office: 60 Gracechurch Street, London EC3V 0HR Nature of business: Investment entity % holding Class of shares: Ordinary shares 100.00 2021 2020 GBP GBP Aggregate capital and reserves (19,984) 30,237 (Loss)/profit for the year (50,221) 47,988 --------------------------------------- ---------------- ---------- ----------
PXOG Muirhill Limited holds its interests in the Tesorillo and El Romeral projects through its holdings of A and B shares respectively in Tarba Energia S.L. Consistent with the prior year, these investments are being held at the cost of investment in Prospex Energy Limited and in PXOG Muirhill Limited.
All of the subsidiaries are incorporated in the UK and registered in England & Wales.
Investments are recognised and de-recognised on the date when their purchase or sale is subject to a relevant contract and the associated risks and rewards have been transferred. The Company manages its investments with a view to profiting from the receipt of investment income and capital appreciation from changes in the fair value of investments.
All investments are initially recognised at the fair value of the consideration given and are subsequently measured at fair value through profit and loss.
Unquoted investments, including both equity and loans are designated at fair value through profit and loss and are subsequently carried in the statement of financial position at fair value. Fair value is determined in line with the fair value guidelines under IFRS.
In accordance with IFRS 10, the proportion of the investment portfolio held by the Company's unconsolidated subsidiaries is presented as part of the fair value of investment entity subsidiaries, along with the fair value of their other assets and liabilities.
The holding period of the Company's investment portfolio is on average greater than one year. For this reason, the portfolio is classified as non-current. It is not possible to identify with certainty investments that will be sold within one year.
Investments in investment entity subsidiaries are accounted for as financial instruments at fair value through profit and loss and are not consolidated in accordance with IFRS10.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
12. INVESTMENTS - continued
These entities hold the Company's interests in investments in portfolio companies. The fair value can increase or reduce from either cash flows to/from the investment entities or valuation movements in line with the Company's valuation policy.
The fair value of these entities is their net asset values.
The Directors determine that in the ordinary course of business, the net asset values of an investment entity subsidiary are considered to be the most appropriate to determine fair value. At each reporting period, they consider whether any additional fair value adjustments need to be made to the net asset values of the investment entity subsidiaries. These adjustments may be required to reflect market participants' considerations about fair value that may include, but are not limited to, liquidity and the portfolio effect of holding multiple investments within the investment entity subsidiary.
13. LOANS AND OTHER FINANCIAL ASSETS Loans to group undertakings GBP ------------------------------ --- --------------------- At 1 January 2020 1,048,978 Repayment (304,661) Other movement (744,317) --------------------------------------- -------------------- At 31 December 2020 and 2021 - --------------------------------------- -------------------- 14. TRADE AND OTHER RECEIVABLES
2021 2020 GBP GBP ------------------------------------ -------------------- ------------------ Current: Trade debtors 22,470 6,425 Amounts owed by group undertakings 803,609 773,345 Other debtors 1,883 113,448 Rent deposit - 10,736 VAT 6,988 11,787 Prepayments and accrued income 6,552 1,317 -------------------- ------------------ 841,502 917,058 ------------------------------------ -------------------- ------------------ Non-current: Amounts owed by group undertakings 1,225,570 989,645 ------------------------------------- -------------------- ------------------ Aggregate amounts 2,067,072 1,906,703 ------------------------------------- -------------------- ------------------
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
In 2018 the Company provided an interest-free loan to PXOG Marshall Limited, a wholly owned subsidiary. The fair value of the financial element of the loan has been calculated by discounting the future cash flow of the loan, GBP1,056,391, at the market rate of 10%. The difference between the total loan and the fair value of the loan i.e. the non-financial element of the loan, has been accounted for as an addition to shares in group undertakings (note 12).
15. CASH AND CASH EQUIVALENTS 2021 2020 GBP GBP --------------- ------------- --------------- Bank accounts 220,060 220,618 ---------------- ------------- ---------------
The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. All of the Company's cash and cash equivalents are at floating rates of interest.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
16. CALLED UP SHARE CAPITAL 2021 2020 2021 2020 Number Number GBP GBP ------------------------------ ------------------- ------------------- ------------ ---------- Allotted, called up and fully paid Ordinary shares of 0.1p each - new 177,310,283 88,543,800 177,310 88,544 Deferred shares of 0.1p each 942,462,000 942,462,000 942,462 942,462 Deferred shares of GBP24 each 54,477 54,477 1,307,459 1,307,459 Deferred shares of 0.9p each 285,785,836 285,785,836 2,572,073 2,572,073 Deferred shares of GBP4.80 each 442,719 442,719 2,125,051 2,125,051 7,124,355 7,035,589 ------------------------------ ------------------- ------------------- ------------ ----------
Share issues
In March 2021, the Company raised GBP750,000 before expenses by way of a placing of 50,000,000 new ordinary shares of GBP0.001 each in the Company at a price of 1.5 pence per share (the "Placing"). The net proceeds of the Placing were primarily used to fund planned programmes at the El Romeral integrated gas production and power station operation in southern Spain and the Podere Gallina licence in Italy.
In July 2021, GBP200,000 of the Convertible Loan Note 2020, were converted into 9,756,098 new ordinary shares of GBP0.001 each.
In August 2021, 11,644,817 new ordinary shares of GBP0.001 were issued at a price of 2.25 pence each on the exercise of warrants, raising GBP262,000 before expenses.
In September 2021, 5,498,597 new ordinary shares of GBP0.001 were issued at a price of 2.25 pence each on the exercise of warrants, raising GBP123,700 before expenses.
In September 2021, 1,338,282 new ordinary shares of GBP0.001 were issued at a price of 2.25 pence each on the exercise of warrants, raising GBP30,000 before expenses.
In September 2021, GBP205,838 of the Convertible Loan Note 2020, were converted into 10,040,885 new ordinary shares of GBP0.001 each.
In December 2021, GBP10,000 of the Convertible Loan Note 2020, were converted into 487,804 new ordinary shares of GBP0.001 each.
Deferred shares rights
The deferred shares have no rights to vote, attend or speak at general meetings of the Company or to receive any dividend or other distribution and have limited rights to participate in any return of capital on a winding-up or liquidation of the Company.
17. TRADE AND OTHER PAYABLES 2021 2020 GBP GBP --------------------------------- ------------------ ------------------ Current: Trade creditors 8,423 25,420 Social security and other taxes 19,469 87,891 Accruals and deferred income 25,000 50,951 52,892 164,262 --------------------------------- ------------------ ------------------
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
18. FINANCIAL LIABILITIES - BORROWINGS 2021 2020 GBP GBP ---------------------- ------------------ ------------------ Current: Bank loan 9,616 5,473 Unsecured loan notes 131,353 282,100 ----------------------- 140,969 287,573 ---------------------- ------------------ ------------------ 2021 2020 GBP GBP ---------------------- ---------------- ----------------- Non-current: Bank loan 32,778 44,159 Unsecured loan notes 214,454 535,839 ----------------------- 247,232 579,998 ---------------------- ---------------- -----------------
Terms and debt repayment schedule:
1 year 1-2 years 2-5 years More than Total or less 5 years 2021 GBP GBP GBP GBP GBP ---------------------- -------------- ------------- ----------------- ----------------- ------------ Bank loan 9,616 9,859 22,919 - 42,394 Unsecured loan notes 131,353 214,454 - - 345,807 ---------------------- -------------- ------------- ----------------- ----------------- ------------ 140,969 224,313 22,919 - 388,201 ---------------------- -------------- ------------- ----------------- ----------------- ------------ 1 year More than or less 1-2 years 2-5 years 5 years Total 2020 GBP GBP GBP GBP GBP ---------------------- ---------- ---------- ------------- ------------- --------- Bank loan 5,473 9,576 30,206 4,377 49,632 Unsecured loan notes 282,100 535,839 - - 817,939 ---------------------- ---------- ---------- ------------- ------------- --------- 287,573 545,415 30,206 4,377 867,571 ---------------------- ---------- ---------- ------------- ------------- ---------
Bank loan
In May 2020, the Company borrowed GBP49,632 from its bank. The Company did not have to pay interest or capital in relation to the first 12 months from the date on which the loan was drawn. Since May 2021, the Company has commenced repayment of the loan. Repayment is by way of 60 equal instalments and interest is charged at 2.5% per annum.
Loan notes
Loan notes ------------------------------------------------------- 2018 2020 2021 Total GBP GBP GBP GBP At 1 January 2020 514,689 - - 514,689 Issued in year - 265,000 - 265,000 Issued in lieu of wages and salaries - 38,250 - 38,250 Transferred to new loan note (112,588) 112,588 - - ------------------------- ----------------- ----------------- ----------------- ----------------- At 31 December 2020 402,101 415,838 - 817,939 Transferred to new loan note (321,681) - 321,681 - Converted into shares - (415,838) - (415,838) Repaid in year (56,294) - - (56,294) At 31 December 2021 24,126 - 321,681 345,807 ------------------------- ----------------- ----------------- ----------------- -----------------
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
18. FINANCIAL LIABILITIES - BORROWINGS - continued
2018 Loan note
The 2018 Notes pay 10% interest biannually. Repayments of capital started in December 2020 with final repayment due on 30 June 2022 (four equal payments). See below for details of capital rolled into 2020 Loan note.
2020 Loan note
The 2020 Notes pay 10% interest per annum. The term of the 2020 Notes is 18 months with capital repayment of unconverted amounts due on 30 June 2022. The 2020 Notes granted the subscribers the right but not the obligation to convert the loan, on notice, into new ordinary shares in the Company each at 2.05 pence per share
During 2021, the loan note subscribers converted their loans of GBP415,838 into 20,284,787 new ordinary shares of 0.1p per share at a price of 2.05p per share.
2021 Loan note
In June 2021, holders of GBP321,681 of the 2018 loan note agreed to rollover their combined holdings into a new unsecured loan note ('the 2021 Loan Note'). The Company issued GBP321,681 of the 2021 Loan Note to existing holders of the 2018 Loan Note ('the Subscribers'), including several directors of the Company.
Under the terms of 2018 Loan Note, holders were entitled to the outstanding capital returned in equal instalments in June 2021, December 2021 and June 2022. The terms of the 2021 Loan Note reflect those of the 2018 Loan Note except all the repayment dates have effectively been extended by 18 months to December 2022, June 2023 and December 2023, while the annualised interest rate is now 12% versus 10%. The 2021 Loan Note will pay 6% interest every six months, with the first payment due on 31 December 2021.
19 DEFERRED TAXATION 2021 2020 GBP GBP ------------------------------ --------------------- --------------------- At 1 January 2021 - - On revaluation of investments 40,394 - ------------------------------ At 31 December 2021 40,394 - ------------------------------ --------------------- --------------------- 20. FINANCIAL INSTRUMENTS
The principal financial instruments used by the Company, from which financial instrument risk arises are as follows:
- Trade and other receivables
- Cash and cash equivalents
- Trade and other payables
A summary of the financial instruments held by category is provided below:
2021 2020 Financial assets measured at amortised GBP GBP costs: ---------------------------------------- --------------- ---------------- Trade and other receivables 37,893 143,713 Cash and cash equivalents 220,060 220,618 Amounts owing from group undertakings 2,029,179 1,762,990 ---------------------------------------- --------------- ---------------- 2,287,132 2,127,321 ---------------------------------------- --------------- ---------------- 2021 2020 Financial liabilities measured GBP GBP at amortised costs: ---------------------------------------- --------------- ---------------- Bank loans 42,394 49,632 Unsecured loan notes 345,807 817,939 Trade and other payables 52,892 164,262 Total financial liabilities 441,093 1,031,833 ---------------------------------------- --------------- ----------------
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
20. FINANCIAL INSTRUMENTS - continued
Financial assets at fair value through profit or loss
Financial instruments that are measured at fair value are classified using a fair value hierarchy that reflects the source of inputs used in deriving the fair value. The three classification levels are:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable market inputs).
The following table presents the Company's assets carried at fair value by valuation method:
Financial assets at fair value through profit or loss: Fair value measurement ------------------------- --------------------------------------------------------------- Level 1 Level 2 Level 3 GBP GBP GBP ------------------------- ----------------------- -------------------- -------------- At 31 December 2021 - - 6,697,305 At 31 December 2020 - - 3,620,890 ------------------------- ------------------------ --------------------- --------------
The financial assets at fair value through profit and loss are the Company's holdings in subsidiary undertakings and one unquoted security and within Level 3 of the fair value hierarchy.
The fair value is determined to be equal to the cost of the investment and is reviewed periodically based on information available about the performance of the underlying business. Where cost is deemed to be inappropriate, t he following table shows the valuation technique used in measuring Level 3 fair values for financial instruments measured at fair value in the statement of financial position, as well as the significant unobservable inputs used. The only method used is that of NPV.
Valuation technique Significant unobservable Inter-relationship inputs between significant unobservable inputs and fair value measurement NPV - The valuation Forecast annual revenue The estimated fair model considers the growth rate value would increase present value of expected Forecast gas prices (decrease) if: receipts, discounted Risk-adjusted discount - the annual revenue using a risk-adjusted rate growth rate were higher discount rate. The (lower); expected receipt is - the gas prices were determined by considering higher (lower); or the possible scenarios - the risk-adjusted of forecast revenue discount rate were and gas prices, the lower (higher). amount to be received Generally, a change under each scenario in the any of the and the probability above variables would of each scenario. be accompanied by a directionally similar change in revenue receipts and a consequential change in the valuation of the investment ------------------------- ------------------------------
Financial risk management
The Company's activities expose it to a variety of risks including market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. The Company manages these risks through an effective risk management programme and through this programme, the Board seeks to minimise potential adverse effects on the Company's financial performance.
The Board provides written objectives, policies and procedures with regards to managing currency and interest risk exposures, liquidity and credit risk including guidance on the use of certain derivative and non-derivative financial instruments.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
20. FINANCIAL INSTRUMENTS - continued
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its receivables and its cash deposits. It is Company policy to assess the credit risk of new customers before entering contracts. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
Liquidity risk and interest rate risk
Liquidity risk arises from the Company's management of working capital. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Board regularly receives cash flow projections for a minimum period of 12 months, together with information regarding cash balances monthly.
The Company is principally funded by equity and invests in short-term deposits, having access to these funds at short notice. The Company's policy throughout the period has been to minimise interest rate risk by placing funds in risk free cash deposits but also to maximise the return on funds placed on deposit.
All cash deposits attract a floating rate of interest. The benchmark rate for determining interest receivable and floating rate assets is linked to the UK base rate.
Foreign currency exposure
At 31 December 2021, the Company's monetary assets and liabilities are denominated in GBP Sterling, the functional currency of the Company, other than EUR161,853 (GBP136,011) of cash at bank. This exposure gives rise to net currency gains and losses recognised in the Statement of Comprehensive Income. A 10% fluctuation in the GBP sterling rate compared to the Euro would give rise to a GBP15,102 gain or GBP12,373 loss in the Company's Statement of Comprehensive Income.
Although the Company has a Euro bank account it has no formal policies in place to hedge the Company's activities to the exposure to currency risk. It is the Company's policy to ensure that it enters into transactions its functional currency wherever possible.
Management regularly monitor the currency profile and obtain informal advice to ensure that the cash balances are held in currencies which minimise the impact on the results and position of the Company from foreign exchange movements.
21. RELATED PARTY DISCLOSURES
Included in loans to group undertakings is an amount of GBP13 (2020: GBP948,022) due from PXOG Massey Limited, the Company's wholly owned subsidiary. Included in trade and other payables is an amount of GBPnil (2020: GBP4,500) due to PXOG Massey Limited. At the year end, a provision of GBPnil (2020: GBP948,022) was made against this balance (note 12).
Included in trade and other receivables is an amount of GBP1,225,570 (2020: GBP989,645) due from PXOG Marshall Limited, the Company's wholly owned subsidiary. Interest receivable of GBP109,618 (2020: GBP91,362) has been accounted for in the Statement of Profit or Loss.
Included in trade and other receivables is an amount of GBP803,596 (2020: GBP773,345) due from PXOG Muirhill Limited, the Company's wholly owned subsidiary.
Included with trade and other receivables is an amount of GBP22,470(2020: GBP12,066) due from Tarba Energia S.L. ("Tarba"). Mark Routh is a director of Tarba. No interest was receivable.
During the year, there were consultancy fees of GBPNil (2020: GBP11,250) and GBP2,500 (2020: GBPNil) charged by Sallork Limited and Sallork Legal and Commercial Consulting Limited ("Sallork") respectively. Included in trade payables at the year-end is GBPnil (2020: GBP1,606) owing to Sallork Limited. Richard Mays is a director and shareholder of both these companies.
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
21. RELATED PARTY DISCLOSURES
Included in trade and other payables are the following balances due to Directors as at 31 December 2021.
2021 2020 GBP GBP ------------------------------------- ------ ------- Edward Dawson - resigned 27/07/2021 - 9,184 -------------------------------------- ------- -------
At the balance sheet date, the Directors had the following interests in the unsecured loan notes (note 18):
2021 2020 GBP GBP ----------------------------------- -------- ------- Richard Mays 13,403 53,613 William Smith 40,210 67,113 James Smith - resigned 27/07/2021 - 41,807 ------------------------------------ -------- ------- 22. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, there is no ultimate controlling party.
23. SHARE-BASED PAYMENT TRANSACTIONS
Share options
At 31 December 2020 and 31 December 2021 outstanding awards to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the rules of the share option scheme, were as follows:
Weighted average Weighted remaining average Number of contractual exercise shares life (years) price (pence) 2021 ---------------- ----------- -------------- ---------------- Brought forward 5,820,544 2.46 6.27 Carried forward 5,820,544 1.46 6.27 ---------------- ----------- -------------- ---------------- Weighted average Weighted remaining average Number of contractual exercise shares life (years) price (pence) 2020 ------------------------- ------------ -------------- ---------------- Brought forward 2,964,530 1.04 17.11 Granted during the year 5,705,060 4.00 Lapsed during the year (2,849,046) (13.00) -------------------------- ------------ -------------- ---------------- Carried forward 5,820,544 2.46 6.27 -------------------------- ------------ -------------- ----------------
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
23. SHARE-BASED PAYMENT TRANSACTIONS - continued
All options were exercisable at the year end. No options were exercised during the year.
The following share-based payment arrangements were in existence at the year-end.
Fair value Expiry Exercise at grant Options Number date price date ---------------------- ----------- ----------- ---------- ----------- 1 Granted 30 April 2012 1,600 30/04/2022 3,125.00p 1,183.40p 2 Granted 16 April 2015 113,884 15/04/2025 76.25p 1.94p 3 Granted 1 June 2021 5,705,060 01/06/2023 4.00p 1.79p ---------------------- ----------- ----------- ---------- -----------
The fair value of remaining share options has been calculated using the Black Scholes model. The assumptions used in the calculation of the fair value of the share options outstanding during the year are as follows:
Grant Expected Risk-free date share Exercise Expected option life interest Options price price volatility (years) rate ---------------------- ------------- ---------- ------------- -------------- ------------ 1 Granted 30 April 2012 4,375.00p 3,125.00p 32.00% 3.50 0.24%-0.43% 2 Granted 16 April 2015 100.00p 76.25p 71.50% 3.00 0.71% 3 Granted 1 June 2021 2.75p 4.00p 163.60% 3.00 0.64% ---------------------- ------------- ---------- ------------- -------------- ------------
The fair value has been calculated assuming that there will be no dividend yield.
Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices over a 3-year period to grant date. All of the above options are equity settled.
All of the share options are equity settled and the charge for the year is GBPnil (2020: GBP102,175).
Warrants
At 31 December 2020 and 31 December 2021, outstanding warrants to subscribe for ordinary shares of 0.1p each in the Company, granted in accordance with the warrant instruments issued by Prospex, were as follows:
Weighted average Weighted remaining average Number of contractual exercise shares life (years) price (pence) 2021 ------------------------ ------------- --------------- ---------------- Brought forward 18,806,694 1.97 2.38 Granted during the year 26,920,000 2.00 2.95 Exercised in the year (18,481,694) 2.25 ------------------------ ------------- --------------- ---------------- Carried forward 27,245,000 1.22 3.03 ------------------------ ------------- --------------- ---------------- Weighted average Weighted remaining average Number of contractual exercise shares life (years) price (pence) 2020 ------------------------- ------------ --------------- ---------------- Brought forward 1,381,000 1.12 13.82 Granted during the year 18,481,694 2.00 2.25 Lapsed during the year (1,056,000) (15.00) -------------------------- ------------ --------------- ---------------- Carried forward 18,806,694 1.97 2.38 -------------------------- ------------ --------------- ----------------
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
23. SHARE-BASED PAYMENT TRANSACTIONS - continued
Warrants - continued
All warrants were exercisable at the year end.
The following warrants were in existence at the year end.
Fair value Expiry Exercise at grant Warrants Number date price date ----------------- ------------ ----------- --------- ----------- Granted 18 March 1 2019 325,000 18/03/2022 10.00p 1.63p Granted 23 March 2 2021 1,920,000 23/03/2023 2.25p 1.28p Granted 23 March 3 2021 25,000,000 23/03/2023 3.00p N/A ----------------- ------------ ----------- --------- -----------
The fair value of the remaining warrants has been calculated using the Black-Scholes model. The assumptions used in the calculation of the fair value of the share options outstanding during the year are as follows:
Grant Expected Risk-free date share Exercise Expected option life interest Warrants price price volatility (years) rate ---------------------- ------------- ---------- ------------- -------------- ----------- 1 Granted 18 March 2019 4.70p 10.00p 106.70% 3.00 0.48% 2 Granted 23 March 2021 1.65p 2.25p 320.00% 2.00 0.24% 3 Granted 23 March 2021 1.65p 3.00p N/A 2.00 N/A ---------------------- ------------- ---------- ------------- -------------- -----------
The fair value has been calculated assuming that there will be no dividend yield.
Volatility was determined by reference to the standard deviation of expected share price returns based on a statistical analysis of daily share prices over a 3-year period to grant date. All of the above options are equity settled.
The 25m warrants granted on 23 March 2021 fall outside the scope of IFRS and as such no charge is made. All of the share warrants are equity settled and the charge for the year is GBP24,496 (2020: GBP102,175). As the warrants relating to the charge for 2021 were all in consideration of shares issued during the year, it was taken directly to equity and charged against the share premium as costs in respect of the issue of shares.
24. DIRECTORS' EMOLUMENTS
Key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Company, including all directors of the Company.
2021 2020 GBP GBP ---------------------------------------- --------- --------- Salaries and other short-term employee benefits 192,072 182,700 Post-employment benefits 11,267 16,900 Share-based payment - 67,222 ----------------------------------------- --------- --------- 203,339 266,822 ---------------------------------------- --------- ---------
Prospex Energy Plc
Notes to the Financial Statements - continued
for the year ended 31 December 2021
24. DIRECTORS' EMOLUMENTS - continued Salaries Benefits Pension and fees in kind contributions 2021 2020 GBP GBP GBP GBP GBP ------------------------------------- ----------- ---------- ---------------- -------- -------- Mark Routh - appointed 27/07/2021 71,923 - - 71,923 - Edward Dawson - resigned 27/07/2021 75,834 2,450 11,267 89,551 174,762 Richard Mays 15,000 - - 15,000 29,520 William Smith 13,500 - - 13,500 32,520 Alasdair Buchanan - appointed 27/08/2021 4,615 - - 4,615 - James Smith - resigned 27/07/2021 8,750 - - 8,750 30,020 189,622 2,450 11,267 203,339 266,822 ------------------------------------- ----------- ---------- ---------------- -------- --------
The number of directors for whom retirement benefits are accruing under money purchase pension schemes amounted to 1 (2020: 1).
The Directors interests in share options as at 31 December 2021 are as follows:
Number of Exercise Date of First date Final date Director shares price grant of exercise of exercise --------------- ----------- ---------- ----------- -------------- -------------- Richard Mays 21,669 76.25p 14/04/2015 14/04/2015 14/04/2025 Richard Mays 810,719 4.00p 01/06/2021 01/06/2021 01/06/2023 832,388 ----------- William Smith 21,669 76.25p 14/04/2015 14/04/2015 14/04/2025 William Smith 810,719 4.00p 01/06/2021 01/06/2021 01/06/2023 832,388 -----------
The options awarded to Richard Mays are held in the name of Sallork Limited, a company he owns and controls.
During the year, R Mays, W Smith and J Smith exercised their share warrants and subscribed for 595,705, 1,195,705 and 964,519 ordinary shares respectively at a price of 2.25p per share. As a consequence, there are no outstanding share warrants for Directors at 31 December 2021 (2020 - 2,755,929).
25. EVENTS AFTER THE REPORTING PERIOD
In February 2022, the Company raised GBP2.455 million before expenses by way of a placing of 70,137,143 new ordinary shares of GBP0.001 each in the Company at a price of 3.50 pence per share.
The net proceeds of the placing have been used to complete the acquisition of a further 20% of the Podere Gallina licence which contains the Selva Gas Field in the Po Valley region of Italy, in April 2022 and for working capital purposes. The acquisition, through its wholly-owned subsidiary PXOG Marshall Limited, took the holding from 17% to 37%. The total consideration amounted to EUR2,164,701 and the working capital adjustment paid was EUR134,500. The Selva Gas Filed is scheduled to come into production by Q2 2023.
In March 2022, the Company granted 6,700,000 share options in the Company to directors and other staff. The options were awarded at 5p per share, vest immediately and are exercisable for a period of three years. The options issued to the directors were:
Mark Routh 2,100,000 William Smith 900,000 Alasdair Buchanan 900,000 Richard Mays 900,000 4,800,000 ------------------- -----------, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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END
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May 19, 2022 02:01 ET (06:01 GMT)
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