REG - Prospex Energy PLC - Final Results
14/05/2024 07:00
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RNS Number : 2434O Prospex Energy PLC 14 May 2024
Prospex Energy PLC / Index: AIM / Epic: PXEN / Sector: Oil and Gas
14 May 2024
Prospex Energy PLC
('Prospex' or the 'Company')
Final Results for Year ended 31 December 2023
and
Notice of Annual General Meeting
Prospex Energy plc, the AIM quoted investment company, is pleased to announce
its audited Final Results for the year ended 31 December 2023 and Notice of
Annual General Meeting ("AGM") on 12 June 2024.
Corporate and Financial Highlights
· Exemplary safety performance by our operators, contractors and
partners with just one minor lost time incident at our Spanish asset and no
environmental issues or incidents.
· Two operating and revenue generating onshore natural gas investments
situated in stable European countries.
· The Company recorded a loss for the year of £1,231,400 (2022: profit:
£7,136,907). This was caused by the re-adjustment of commodity prices to
more normal levels, following the unsustainable and inflated high prices of
2022 attributable to the commencement of the Russian-Ukraine conflict. This
resulted in the revaluation of investments at fair value leading to a
reduction of 2.9% to £15,594,931 from £16,064,640 in 2022 and the unrealised
loss of £469,709 compared to an unrealised gain in 2022 of £9,367,435 (which
was largely due to the Company's increased working interest in Selva from 17%
to 37% in April 2022).
· By September 2023, all of the convertible loan notes issued in July
2022 were converted to equity at 4.25p per share. The £1.87 million raised
through the issue of these convertible loan notes helped to fund the Selva
development project to first gas.
· In April 2023, the Company strengthened the board with the appointment
of Mr. Andrew Hay as Non-Executive Director.
· Significantly strengthened the balance sheet as a result of the
conversion or repayment of the bulk of its interest-bearing debts.
Post period highlights
· All remaining interest-bearing debt outstanding plus accrued interest,
was repaid by 31 March 2024.
· No further debt or equity raises have occurred between the reporting
date and the date of this report.
· The Company is debt free, cash generative and well positioned for
growth.
Operational Highlights
Selva Field - Northern Italy
· 18-month gas sales contract with BP Gas Marketing ("BPGM") signed by
Po Valley Operations Limited ("PVO"), on behalf of the Joint Venture in
February 2023.
· In May 2023, construction of the gas processing facility at the Podere
Maiar-1 wellsite at the Selva field was completed on schedule and within 3% of
budget with successful connection to the Italian National Transmission System
Operator ("SNAM") gas grid.
· PVO successfully recovered the €757,000 performance bond (€280,090
net to PXEN) previously deposited with SNAM.
· In June 2023, Italian Energy Ministry issued the formal documentation
to enable the commencement of gas production from the Selva field.
· First gas was achieved from the Selva field on 4 July 2023.
· By year end, following completion of the commissioning of the new gas
processing facilities at Selva, production has steadily increased to a stable
rate of ≈ 80,000 scm/d.
El Romeral - Southern Spain
· In 2023, the El Romeral power plant generated gross revenues from
electricity production of €1.8 million (≈€0.9 million net to PXEN).
· In May 2023 through Tarba Energía Srl ("Tarba") the operating
company, 20 hectares of land adjacent to the El Romeral power plant was leased
for 25 years for Project Helios a 5MW solar photovoltaic project.
Notice of Annual General Meeting
The Company also gives notice that its 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 12 June 2024.
The Financial Results for the year ended 31 December 2023 together with the
Notice of AGM will be available to download from the Company's website:
https://prospex.energy/ (https://prospex.energy/) and will also be posted to
shareholders on or around 15 May 2024.
Commenting on the results, Mark Routh, Prospex's CEO, said:
"It has been an extremely successful year for Prospex, with the Company having
reached a number of significant milestones. Perhaps the most noteworthy
being the start of gas production from the Selva Field in Italy, further
de-risking our business with two onshore producing and revenue generating
investments in two European countries.
"Despite having strengthened the balance sheet during the year, the Company is
reporting a loss for the period. This in my view, is in no way reflective of
the performance of the Company but attributable to events outside of our
control, mainly an adjustment of the inflated and unsustainable commodity
prices attributable to global tensions in 2022 and the subsequent revaluation
of our assets.
"Nevertheless, we remain well positioned for growth. The Company is
debt-free, has no warrants outstanding and is self-sustaining on a
business-as-usual basis. Prospex is in a much stronger financial position
than it was at the end of the prior year. None of this would have been
possible without the continued support of our existing and new shareholders
and importantly the debt holders, who demonstrated continued belief in our
vision by converting their debt into equity, having funded the development and
transition of Selva into a producing field."
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.
* * ENDS * *
For further information visit www.prospex.energy (http://www.prospex.energy)
or contact the following:
Mark Routh Prospex Energy PLC Tel: +44 (Tel:+44) (0) 20 7236 1177
Ritchie Balmer Strand Hanson Limited Tel: +44 (0) 20 7409 3494
Rory Murphy
Lional Therond / Daniel Fox-Davies Fox-Davies Capital Limited Tel: +44 (0) 20 3884 8450
Andrew Monk (Corporate Broking) VSA Capital Limited Tel: +44 (0) 20 3005 5000
Andrew Raca / Alex Cabral (Corporate Finance)
Ana Ribeiro / Susie Geliher St Brides Partners Limited Tel: +44 (0) 20 7236 1177
Notes
Prospex Energy PLC is an AIM quoted investment company focused on high impact
onshore and shallow offshore European opportunities with short timelines to
production. The Company's strategy is to acquire undervalued projects with
multiple, tangible value trigger points that can be realised within 12 months
of acquisition and then applying low-cost re-evaluation techniques to identify
and de-risk prospects. The Company will rapidly scale up gas production in
the short term to generate internal revenues that can then be deployed to
develop the asset base and increase production further.
About Selva:
The Selva Malvezzi Production Concession is in the Po Valley region of
northern Italy. The concession contains the Selva gas-field as well as
exciting exploration and development opportunities. The Podere Maiar-1 well
at Selva was completed in December 2017 and successfully found a commercial
gas accumulation up-dip of the previous wells on the Selva field. The
Company has a 37% working interest in the Production Concession held via
Prospex's two wholly owned subsidiaries, PXOG Marshall Ltd (17% of the
Concession) and UOG Italia Srl (20% of the Concession).
The Selva Malvezzi Production Concession holds independently verified 2P gross
proven reserves of 13.4 Bcf (5.0 Bcf net to Prospex at 37% WI) in Selva, gross
Contingent 2C Resources of 14.1 Bcf (5.2 Bcf net) and a further 88.2 Bcf of
gross Best Estimate Prospective Resources (un-risked) (32.6 Bcf net).( 1 )
An independent Competent Person's Report of the Podere Gallina Licence which
was converted into the Selva Malvezzi Production Concession at first gas in
July 2023, was prepared by CGG Services (UK) Limited in July 2022 on behalf of
the joint venture.( 1 ) It attributed a total of 379 MMscm (13.4 Bcf) gross 2P
reserves for the Selva redevelopment project.
References:
1 Source: "Competent Person's Report Podere Gallina Licence, Italy" prepared
by CGG Services (UK) Limited in July 2022 : https://bit.ly/44VF02A
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbit.ly%2F44VF02A&data=05%7C01%7Cana%40stbridespartners.co.uk%7Ce27db61066ba4edeed3f08db94f7d5a5%7C48b7268319d344289c4b73cf144d89ed%7C1%7C0%7C638267564391602202%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=glSh9awfUUAreAZfLeRjoo%2FtRCIsIW2TSML5zO%2FUkew%3D&reserved=0)
Glossary:
scm Standard cubic metres
scm/d Standard cubic metres per day
MMscm Million standard cubic metres
Bcf Billion standard cubic feet
MMscfd million standard cubic feet per day
MWh Mega Watt hour
TTF The 'Title Transfer Facility' - a virtual
trading point for natural gas in the Netherlands.
Qualified Person Signoff
In accordance with the AIM notice for Mining and Oil and Gas Companies, the
Company discloses that Mark Routh, the CEO and a director of Prospex Energy
plc has reviewed the technical information contained herein. Mark Routh has
an MSc in Petroleum Engineering and has been a member of the Society of
Petroleum Engineers since 1985. He has over 40 years operating experience in
the upstream oil and gas industry. Mark Routh consents to the inclusion of
the information in the form and context in which it appears.
Prospex Energy Plc
Chairman's Report
for the year ended 31 December 2023
Prospex Energy is an AIM quoted investment company with interests in two
producing fields, in Spain and Italy, both of which are operated by the
Company's partners. During 2023 the Company, through its investment in Tarba
Energía S.L. (held via PXOG Muirhill Ltd) continued with electricity sales
from its gas to power facility in southern Spain and from July 2023 also had
production income from the sale of natural gas from the Selva field in
northern Italy. Operations in the Company's investment portfolio were
carried out with an exemplary safety performance by our operators, contractors
and partners with just one minor lost time incident at our Spanish asset and
no environmental issues or incidents. The Company continues to monitor its
HSE performance by promoting a high level of HSE awareness and rewarding good
practices and culture with its partners, operators and subcontractors.
The 2023 financial and corporate highlights for Prospex Energy were
strengthened by revenue generated from production at two onshore gas assets
situated in stable European countries. However, the year saw commodity
prices soften following the unsustainable and inflated high prices experienced
in 2022, attributable to global tensions, perceived risk and concerns
regarding energy supply in Europe. Naturally, and with commodity pricing
having returned to more normal levels, there has been a consequent adjustment
to the share price.
In February 2023, Po Valley Operations Limited ("PVO"), the operator of the
Selva Malvezzi production concession, in which Prospex has a 37% working
interest, signed an 18-month gas sales contract with BP Gas Marketing ("BPGM")
to commence on 1 April 2023 with potential to extend, on behalf of the Joint
Venture. The joint venture partners are confident that the BPGM contract
will be renewed before the end of its 18-month term on 1 October 2024. An
estimated 37 million standard cubic metres of natural gas is expected to be
supplied to BPGM under the contract. The gas supply price is linked to
Italy's "Heren PSV day ahead mid-price assessment." During the period, the
Company also announced that the Joint Venture was fully funded to complete the
Podere Maiar-1 production facility development with first gas on track for Q2
2023.
The El Romeral gas and power project in Spain, with gas production wells
supplying gas to an 8.1MW power plant near Carmona in Southern Spain is owned
and operated by Tarba Energía Srl ("Tarba"), the operating company. It is
currently operating at about 30% of its full capacity because Tarba is waiting
on permits to drill further natural gas wells on the concessions to increase
production. Prospex owns a 49.9% working interest in the El Romeral project
via Tarba which is owned through its investment in PXOG Muirhill Limited.
The remaining 50.1% working interest is owned by Warrego Energy Limited.
Tarba sells electricity generated from the plant on the spot market in
Spain. The El Romeral licences comprise three contiguous production
concessions.
In February 2023, Hancock Energy (PB) Pty Ltd completed the acquisition of
100% of the shares of Warrego Energy Ltd, which was then de-listed from the
ASX exchange in Sydney, Australia.
Mr. Andrew Hay was appointed as Non-Executive Director of Prospex Energy plc
in April 2023. Andrew has more than 30 years of experience in the corporate
finance sector and capital markets and a deep understanding of the upstream
energy markets.
In May 2023, construction of the gas processing facility at the Podere Maiar 1
wellsite at the Selva field in the Po Valley was completed on schedule and
within 3% of budget with successful connection to the Italian National
Transmission System Operator ("SNAM") gas grid. PVO successfully recovered
the €757,000 performance bond (€280,090 net to PXEN) previously deposited
with SNAM. The return of the bond was conditional on the completion of the
SNAM pipeline tie in connection, the Gas Sales Agreement and the
transportation arrangements.
In May 2023, through Tarba, 20 hectares of land adjacent to the El Romeral
power plant in Spain was leased for 25 years for Project Helios, a 5MW solar
photovoltaic project. The project, which involves the installation of an
array of solar panels with a maximum power output of 5MW peak, was tendered
with five companies based in Spain. Permitting, procurement and installation
is expected to take less than 12 months. Tarba has an existing grid
connection with 8.2MW output allocated to El Romeral which is currently
utilising just 2.7 MW. Further grid capacity is expected to be available to
accept increased output with the existing infrastructure.
In June 2023, final safety checks by the local Fire Department were
successfully completed and formal documentation was issued by the Italian
Energy Ministry to enable the commencement of gas production from the Selva
field.
On 4 July 2023 the Company announced the start of gas production from the
Selva field in the Po Valley region of northern Italy. This was a
transformational milestone securing production income from two onshore assets
in two European countries.
In July 2023, the Company launched a new corporate website at
www.prospex.energy (http://www.prospex.energy) .
In early August 2023, PVO completed a four-week ramp-up and commissioning
programme at the new gas processing facilities at the Podere Maiar-1 well site
in the Selva gas field.
By September 2023, all of the convertible loan notes issued in July 2022 were
converted to equity at 4.25p per share. The £1.87 million raised through
their issue helped to fund the Selva development project to first gas.
In October 2023, PVO reported that production at the Podere Maiar-1 gas well
was running at 62,000 scm/d in line with the outlined ramp-up and testing
programme. Longer term production rates from the well were set at targeting
at least 80,000 scm/d. (scm = standard cubic metres).
Gross quarterly production from the Selva field for the third quarter of 2023
was reported at 5,658,117 scm (2,093,503 scm attributable to Prospex) and
gross revenue for the quarter was €1,937,072 (€716,717 attributable to
Prospex).
In 2023, the El Romeral power plant in Spain generated gross revenues from
electricity production of €1.8 million (≈€0.9 million net to PXEN).
Gross quarterly production from the Selva field for the fourth quarter of 2023
was reported at 4,180,015 scm of gas (1,546,605 scm attributable to Prospex)
and gross revenue for the quarter €1,773,302 (€656,122 attributable to
Prospex).
The operator PVO is progressing with the other projects in the Selva Malvezzi
production concession including interactions with local landowners and
progressing the permitting process with the regulatory authorities.
Following a successful project of reprocessing the existing 2D seismic lines
across the production concession, the Joint Venture is evaluating the
potential for a new seismic acquisition programme over the licence area in
order to optimise the drilling programmes of the identified contingent
resources at Selva North, Selva South and the East Selva and Riccardina
prospects.
Post period end:
Gross Quarterly production from the Selva field for the first quarter of 2024
was 6,385,255 scm of gas (2,362,544 scm attributable to Prospex) and gross
revenue for the quarter was €1,906,891 (€705,549 attributable to Prospex).
Also post period end, all remaining interest-bearing debt outstanding at the
reporting date, and accrued interest, was repaid to our supportive Loan Note
holders by 31 March 2024. No further debt or equity raises have occurred
between the reporting date and the date of this report.
The Company now has no outstanding debts and has general and administrative
costs from this point forward covered by its production income.
Financial Review
The Company recorded a loss for the year of £1,231,400 (2022: profit -
£7,136,907).
The current year's loss includes an unrealised loss on revaluation of
investments of £469,709 predominantly reflecting the impact on the Company's
investments of the decline in the forward curve of prices for European natural
gas during 2023.
The prior year's profit was due to a £9,367,435 surplus on the revaluation of
investments predominantly reflecting an increased working interest, from 17%
to 37%, acquired in the Italian Podere Gallina licence (now the Selva Malvezzi
Production Concession) during 2022.
Administrative expenses increased by £136,788 (14%) to £1,112,513 (2022:
£975,725).
Net finance income increased by £127,897 to £278,926 (2022: £151,029).
The Company is reporting an increase in shareholder equity (net asset value)
at 31 December 2023 of £1,426,447, to £20,577,048 (2022: £19,150,601).
Total Assets decreased by £1,263,429 to £21,799,310 (2022: £23,062,739).
Total Liabilities decreased by £2,689,876 to £1,222,262 (2022: £3,912,138).
The revaluation of investments at fair value resulted in a reduction of 2.9%
to £15,594,931 (2022: £16,064,640) and the unrealised loss of £469,709
(2022: Gain - £9,367,435). This was predominantly a result of the decline
during the reporting period in the forward curve of European gas prices, and
the after-tax impact of this on the Company's 37% working interest in the
Podere Gallina licence in Italy.
(Note - The Podere Gallina exploration permit was converted into the Selva
Malvezzi production concession at the time of the first gas production from
the field in July 2023).
The Italian asset has been re-valued using the same valuation methodology
which was used in the audited financial statements at the end of the prior
year, updated to reflect underlying future gas pricing based on the benchmark
Title Transfer Facility ("TTF") European forward contract gas prices
applicable on 31 December 2023.
Due to extreme market volatility during the prior reporting period, the prior
year's valuation was based on TTF forward contract prices as at 11 May 2023.
At 31 December 2023, the Company held cash and cash equivalents of £3,186
(2022: £1,482,762).
The funds held at the end of the prior year were predominantly applied to
completion of the construction of the gas processing facility at Podere Maiar
1, resulting in an increase during the year in the amounts owed to the Company
by its group undertakings.
Amounts owed to the Company by its investment vehicles earn interest and are
repaid out of surplus funds arising from after-tax net earnings in the
underlying undertakings.
The strengthening of the Company's balance sheet during the year was primarily
a result of the conversion or repayment of the bulk of its interest-bearing
debts. Subsequent to year-end, in March 2024, the Company repaid all
remaining debt, and no further debt finance has been required or raised.
Preparation of consolidated financial statements
Prospex Energy Plc is an investment Company, as such the results of its
subsidiaries are not consolidated up to the parent company. These financial
statements therefore represent the financial statements of the Company alone.
The Company's interests in its subsidiaries are recognised at fair value
through profit and loss. The effect of this is that although the Group has
been selling gas from its Selva Malvezzi Concession in northern Italy since
July 2023 and has been selling electricity from its El Romeral power plant in
southern Spain since March 2021, the only actual income the parent company
Prospex Energy plc has received to date is from the interest on the
intercompany loans from the parent company to its subsidiaries. However
there have been regular loan repayments from the subsidiaries in which the
Italian asset is held, PXOG Marshall Ltd. and UOG Italia Ltd. and from the
subsidiary PXOG Muirhill Ltd. in which the Company's investment in the Spanish
operator Tarba Energía S.L. is held. The effect of this is to significantly
improve the balance sheet of the parent company. The intercompany loans were
made to realise a return on the investments in the activities of the
subsidiaries. In Italy the parent company loans were for drilling the well,
acquiring the further 20% of the licence from UOG and to fund the Company's
share of the gas plant development to first gas. In Spain the loans were to
acquire and optimise the asset.
Business Development
During 2023, Prospex either identified or was offered more than 25 potential
deals or farm-in opportunities in its core geographical area of interest of
Europe focussing on natural gas and power projects. The Prospex technical
team undertook in depth evaluations on 12 of these opportunities and
recommended that the Board should progress to make an offer on two deals which
were advanced to the heads of terms stage. One of those was ultimately not
concluded since the Board considered, on more detailed investigation, that it
involved onerously high drilling and development costs in the context of the
geological chance of success. The other opportunity passed our due diligence
process and the Company was ready to invest, subject to a fundraise. At that
time, the Board was advised and determined that challenging stock market
conditions meant that such a fundraise could only be completed on terms deemed
to be unattractive to shareholders, so the Company did not commit to the
farm-in.
The Company continues to focus on onshore natural gas and power assets in
Europe. The Company's leadership considers that this geographical and
product focus is an essential ingredient to setting Company strategy and
defining the boundaries within which we operate. Natural gas has been widely
recognised as the transition fuel as Europe progresses to rely upon less
carbon intensive energy sources.
Outlook
The Board is satisfied with the progress made during the year under review,
and subsequently. The Company is now debt-free, self-sustaining on a
business-as-usual basis, and in a much stronger financial position than it was
at the end of the prior year.
None of this would have been possible without the support of the Company's
investors, and in particular of the erstwhile debt-holders of the Company, who
funded the development and conversion of Selva Malvezzi into a producing asset
and many of whom have shown ongoing support for the Company by subsequently
converting a substantial portion of the debt owed to them into equity.
Amongst this group of individuals are employees and the directors of the
Company. I take this opportunity to thank them all for their long-standing
and valued support.
Having strengthened the balance sheet during 2023, and with both capital and
energy commodities markets stabilising, if not strengthening, the outlook for
the Company is one of growth. It is anticipated that this growth will be
both organic, with prospects for increasing the output and diversification of
existing assets, and external, with the active pursuit of new assets which
meet the Company's discerning investment requirements, to add to the
portfolio. The Board and staff are very active on both fronts and good
progress is being made. The Board looks forward to being able to make
announcements in these regards in the near future.
Bill Smith
Non-Executive Chairman
14 May 2024
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2023
2023 2022
Notes £ £
CONTINUING OPERATIONS
Other operating income 5 36,936 -
Administrative expenses (1,112,513) (975,725)
Share-based payment charges (296,191) (187,417)
OPERATING LOSS (1,371,768) (1,163,142)
(Loss)/gain on revaluation of investments 12 (469,709) 9,367,435
(1,841,477) 8,204,293
Finance income 7 519,982 324,052
Finance costs 7 (241,056) (173,023)
(LOSS)/PROFIT BEFORE INCOME TAX 8 (1,562,551) 8,355,322
Income tax 9 331,151 (1,218,415)
(LOSS)/PROFIT FOR THE YEAR (1,231,400) 7,136,907
(LOSS)/EARNINGS PER SHARE 10
Basic (loss)/earnings pence per share (0.41)p 2.88p
Diluted (loss)/earnings pence per share (0.41)p 2.66p
Statement of Financial Position
31 December 2023
2023 2022
Notes £ £
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11 - -
Investments 12 15,594,931 16,064,640
15,594,931 16,064,640
CURRENT ASSETS
Trade and other receivables 13 6,201,093 5,515,237
Investments 14 100 100
Cash and cash equivalents 15 3,186 1,482,762
6,204,379 6,998,099
TOTAL ASSETS 21,799,310 23,062,739
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 16 7,279,630 7,225,893
Share premium 17,158,847 14,850,928
Merger reserve 2,416,667 2,416,667
Capital redemption reserve 43,333 43,333
Fair value reserve 14,617,174 14,755,732
Retained earnings (20,938,603) (20,141,952)
TOTAL EQUITY 20,577,048 19,150,601
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
- Interest bearing loans and borrowings 18 - 799,145
Deferred taxation 19 927,658 1,258,809
927,658 2,057,954
CURRENT LIABILITIES
Trade and other payables 17 126,117 41,440
Financial liabilities - borrowings
- Interest bearing loans and borrowings 18 168,487 1,812,744
294,604 1,854,184
TOTAL LIABILITIES 1,222,262 3,912,138
TOTAL EQUITY AND LIABILITIES 21,799,310 23,062,739
The financial statements were approved by the Board of Directors and
authorised for issue on 14 May 2024 and were signed on its behalf by:
Mark Routh
Director
Statement of Changes in Equity
for the year ended 31 December 2023
Share capital Share premium Merger reserve Capital redemption reserve Fair value reserve Retained earnings Total
£ £ £ £ £ £
Balance at 1 January 2022 7,124,355 11,599,333 2,416,667 43,333 6,067,267 (18,748,005) 8,502,950
Changes in equity
Profit for the year - - - - - 7,136,907 7,136,907
Issue of shares 101,538 3,333,893 - - - - 3,435,431
Costs of shares issued - (112,104) - - - - (112,104)
Lapse of share options - 29,806 - - - (29,806) -
Equity-settled share-based payments - - - - 187,417 187,417
Transfer to fair value reserve - - - - 8,688,465 (8,688,465) -
Balance at 31 December 2022 7,225,893 14,850,928 2,416,667 43,333 14,755,732 (20,141,952) 19,150,601
Changes in equity
Loss for the year - - - - - (1,231,400) (1,231.400)
Issue of shares 53,737 2,307,919 - - - - 2,361,656
Equity-settled share-based payments - - - - - 296,191 296,191
Transfer to fair value reserve - - - - (138,558) 138,558 -
Balance at 31 December 2023 7,279,630 17,158,847 2,416,667 43,333 14,617,174 (20,938,603) 20,577,048
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
Fair value reserve - the cumulative fair value changes of the company's fixed
asset investment, net of deferred tax
Retained earnings - Accumulated comprehensive income for the year and prior
periods
Statement of Cash Flows
for the year ended 31 December 2023
2023 2022
Notes £ £
Cash outflow from operations 1 (1,161,712) (4,113,537)
Cash flows from investing activities
Interest received 4,938 2,247
Interest paid (166,365) (124,338)
Net cash outflow from investing activities (161,427) (122,091)
Cash flows from financing activities
New loan notes - 2,370,000
Bank loan repayment - (42,394)
Loan repayments (214,454) (131,353)
Share issue 58,017 3,414,181
Costs of shares issued - (112,104)
Net cash (outflow)/inflow from financing activities (156,437) 5,498,330
(Decrease)/increase in cash and cash equivalents (1,479,576) 1,262,702
Cash and cash equivalents at beginning of year 2 1,482,762 220,060
Cash and cash equivalents at end of year 2 3,186 1,482,762
Notes to the Statement of Cash Flows
for the year ended 31 December 2023
1. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM
OPERATIONS
2023 2022
£ £
Cash flows from operations
(Loss)/profit before income tax (1,562,551) 8,355,322
Loss/(gain) on revaluation of fixed asset investments 469,709 (9,367,435)
Finance income (519,982) (324,052)
Finance costs 241,056 173,023
Operating loss (1,371,768) (1,163,142)
Increase in trade and other receivables (170,812) (3,126,358)
Increase/(decrease) in trade and other payables 84,677 (11,454)
Equity settled share-based payments 296,191 187,417
Net cash outflow from operations (1,161,712) (4,113,537)
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 2023 31.12.23 01.01.23
£ £
Cash and cash equivalents 3,186 1,482,762
Year ended 31 December 2022 31.12.22 01.01.22
£ £
Cash and cash equivalents 1,482,762 220,060
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
(£), rounded to the nearest £1.
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 2023 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 Company has reported an operating loss for the 2023 year of £1,371,768.
In 2024 it is expected that the Company will have increased receipts
resulting from ongoing gas sales from its investment in Italy. These
receipts will initially be received as loan repayments together with interest
charged, reimbursing the Company for capital advances made in prior years
which were applied to acquisition, exploration and development costs. As a
result, it is expected that the Company will again record an operating loss
during 2024, but an increase in cash inflows and balance sheet strength.
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 and anticipated income from its Italian asset will be sufficient
to support the current budgeted activities in 2024. Furthermore, the
Company's asset in Spain is fully self-funding at current operating levels and
is expected to have sufficient cash resources and income to fund existing
operations beyond the end of 2024.
The Board expects to raise additional funding only as and when required to
cover any shortfall between the Group's own cash resources and its development
and expansion of activities. Should regulatory approval be received which
allows for an expansion of current operations, or appropriate new investment
opportunities arise which meet the Company's objectives and criteria, then the
Directors will explore all potential sources of funding available to meet such
shortfall. Based on the Company's track-record, assets and prospects, the
Directors have a reasonable expectation that they will be able to secure such
further funding should the need arise.
The Directors have therefore prepared the financial statements on a going
concern basis.
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 statement of
financial position 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 statement of financial position 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.
2. ACCOUNTING POLICIES -
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 statement of financial position. 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.
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 (£). 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 statement of financial
position 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.
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 S1 General requirements for Disclosure of Sustainability-related Financial 01/01/2024
Information
IFRS S2 Climate-related Disclosures 01/01/2024
IAS 1 Amendment - Classification of Liabilities as Current or Non-Current 01/01/2024
IFRS 16 Amendment - Lease Liability in a Sale and Leaseback 01/01/2024
IAS 1 Amendment - Non-current Liabilities with Covenants 01/01/2024
IAS 7, IFRS 7 Amendment - Supplier Finance Arrangements 01/01/2024
IAS 21 Amendment - Lack of Exchangeability 01/01/2025
SASB Standards Amendment - To enhance SASB standards international applicability 01/01/2025
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.
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
statement of financial position 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
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 2023. 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 2023 as shown on the
Statement of Financial Position all relate to the Investment activity.
5. OTHER OPERATING INCOME
2023 2022
£ £
Consultancy fees 36,936 -
6. EMPLOYEES AND DIRECTORS
2023 2022
£ £
Wages and salaries 464,802 484,633
Social security costs 48,244 56,425
Other pension costs 5,483 10,140
Share-based payments 296,191 179,971
814,720 731,169
The average number of employees during the year was as follows:
2023 2022
Number Number
Directors 4 4
Staff 3 3
7 7
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 £nil (2022: £nil).
Details of Directors' remuneration can be found in note 24.
7. NET FINANCE COSTS
2023 2022
£ £
Finance income
Interest receivable on group loan 515,044 321,805
Bank interest receivable 4,938 2,247
519,982 324,052
Finance costs
Loan interest payable 240,709 166,718
Bank loan interest - 821
Interest on overdue tax 347 5,484
241,056 173,023
Net finance income 278,926 151,029
8. PROFIT BEFORE INCOME TAX
The profit before income tax is stated after charging:
2023 2022
£ £
Auditors' remuneration 42,900 27,000
Foreign exchange differences 6,577 1,733
9. INCOME TAX
2023 2022
£ £
Current tax charge
UK corporation tax on profit for the period at 23.52% (2022: 19%) - -
Deferred tax (331,151) 1,218,415
Tax charge for the year (331,151) 1,218,415
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:
2023 2022
£ £
(Loss)/profit before income tax (1,562,551) 8,355,322
(Loss)/profit before income tax multiplied by effective rate of UK corporation (367,512) 1,587,511
tax of 23.52% (2022: 19.00%)
Effects of
Non-deductible expenses 70,100 36,560
Losses used for group relief - 17,638
Tax losses not utilised 186,937 138,104
Unrealised chargeable losses/(gains) 110,475 (1,779,813)
Deferred tax (331,151) 1,218,415
36,361 (369,096)
Current tax charge (331,151) 1,218,415
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 £2.3m (2022:
25% - £2.1m) arising from the accumulated tax losses of approximately £9.2m
(2022: £8.4m) carried forward has been used to reduce the deferred tax charge
on the unrealised gain arising on the revaluation of investments. This will
be subject to agreement with HMRC.
The main UK corporation tax rate changed from 19% to 25% with effect from 1
April 2023, resulting in an effective rate in the year of 23.52%. 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.
10. EARNINGS PER SHARE
Year ended 31 December 2023 Year ended 31 December 2022
Earnings Number of shares Per share amount Earnings Number of shares Per share amount
£ £
Basic EPS
Profit for the year and earnings available to ordinary shareholders (1,231,400) 298,729,117 (0.41)p 7,136,907 247,635,519 2.88p
Effect of dilutive securities
Options and warrants - - - 3,057,387
Convertible loan notes 129,734 22,296,906
Diluted EPS
Adjusted earnings (1,231,400) 298,729,117 (0.41)p 7,266,641 272,989,812 2.66p
For 2023, the loss and weighted average number of shares used for calculating
the diluted loss per share are identical to those for the basic loss per
share. The outstanding share options (note 23) would have the effect of
reducing the loss per share and would therefore not be dilutive under IAS 33
'Earnings per share'.
11. PROPERTY, PLANT AND EQUIPMENT
Computer equipment
COST £
At 1 January 2022 and 2023 and 31 December 2023 1,699
DEPRECIATION
At 1 January 2022 and 2023 and 31 December 2023 1,699
NET BOOK VALUE
At 31 December 2023 -
At 31 December 2022 -
12. INVESTMENTS
Shares in group undertakings Unlisted investments Total
£ £ £
COST
At 1 January 2022 6,647,305 50,000 6,697,305
Reclassified to current asset investments (100) - (100)
Revaluations 9,367,435 - 9,367,435
At 31 December 2022 16,014,640 50,000 16,064,640
Revaluations (469,709) - (469,709)
At 31 December 2023 15,544,931 50,000 15,594,931
Shares in group undertakings represent investments in PXOG Marshall Limited of
£15,544,931 (2022: £6,647,205) and PXOG Muirhill Limited of £100 (2022:
£100).
The Company's investments at the Statement of Financial Position date in the
share capital of companies include the following:
PXOG Marshall Limited
Registered office: 60 Gracechurch Street, London EC3V 0HR
Nature of business: Investment entity % holding
Ordinary shares 100.00
2023 2022
£ £
Aggregate capital and reserves 15,544,831 16,014,540
(Loss)/profit for the year (469,709) 9,367,335
The underlying value of PXOG Marshall Limited is based on the underlying value
of the Selva Malvezzi Production Concession, Po Valley, Italy, of which it
owned 37% 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 2022.
The DCF model has been updated to reflect forward gas prices as at 31
December 2023 using the Dutch TTF Gas Futures contracts for 2024 and
subsequent production years. The DCF model has also been updated to account
for a decelerated annual production rate which lengthens the cashflow period
from 10 years to 15 years. The decreased annual production rate is based on
actual and planned production rates. 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 2022 CPR has
been updated and included. With the achievement of 1(st) production at the
Podere Maiar 1 well, and successful conversion of the exploration licence to a
production licence, the likelihood of realising the contingent resources,
which are on the same production licence, has increased. This has resulted
in an increase in the valuation of these resources.
PXOG Muirhill Limited
Registered office: 60 Gracechurch Street, London EC3V 0HR
Nature of business: Investment entity % holding
Class of shares:
Ordinary shares 100.00
2023 2022
£ £
Aggregate capital and reserves 3,415 17,311
(Loss)/profit for the year (13,896) 37,295
PXOG Muirhill Limited holds its interests in the Tesorillo and El Romeral
projects through its holdings of A and B shares respectively in Tarba
Energía 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, with the exception of PXOG Muirhill Limited, 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.
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. TRADE AND OTHER RECEIVABLES
2023 2022
£ £
Current:
Trade debtors 3,346 -
Amounts owed by group undertakings 6,185,765 5,496,676
Other debtors - 1,883
VAT 6,926 5,760
Prepayments and accrued income 5,056 10,918
6,201,093 5,515,237
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
14. CURRENT ASSET INVESTMENTS
2023 2022
Shares held for sale £ £
Shares in group undertakings 100 100
The investment in PXOG Massey Limited is held at £100, 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 £215,000 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 (£182,650) had been received by Prospex by 31 December 2020. As at
the statement of financial position date, although it is still expected, the
final condition of the SPA had not been met.
Should the final condition of the SPA (being the approval of the regulator in
Romania for the transfer of the asset) not be met, the asset would need to be
reinstated at fair value which is considered to be higher than the carrying
value. The Directors have taken a prudent view not to recognise this asset
at fair value unless it is virtually certain that the final condition of the
SPA will not be met.
15. CASH AND CASH EQUIVALENTS
2023 2022
£ £
Bank accounts 3,186 1,482,762
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.
16. CALLED UP SHARE CAPITAL
2023 2022 2023 2022
Number Number £ £
Allotted, called up and fully paid
Ordinary shares of 0.1p each - new 332,584,535 278,847,512 332,585 278,848
Deferred shares of 0.1p each 942,462,000 942,462,000 942,462 942,462
Deferred shares of £24 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 £4.80 each 442,719 442,719 2,125,051 2,125,051
7,279,630 7,225,893
Share issues
In January 2023, options over 850,400 were exercised, and 450,400 and 400,000
new ordinary shares of £0.001 each were issued at a price of 4 pence per
share and 5 pence per share respectively, raising £38,017 before expenses.
In February 2023, 666,684 new ordinary shares of £0.001 were issued at a
price of 3.00 pence each on the exercise of warrants, raising £20,000 before
expenses.
During the year, 45,476,551 and 6,743,388 new ordinary shares of £0.001 were
issued at a price of 4.25 pence each and 5.50 pence each respectively on the
conversion of loan notes, valued at £2,303,639 including capitalised
interest.
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
2023 2022
£ £
Current:
Trade creditors 28,889 -
Social security and other taxes 9,358 15,419
Accruals and deferred income 87,870 26,021
126,117 41,440
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
18. FINANCIAL LIABILITIES - BORROWINGS
2023 2022
£ £
Current:
Unsecured loan notes 168,487 1,812,744
168,487 1,812,744
2023 2022
£ £
Non-current:
Unsecured loan notes - 799,145
- 799,145
Terms and debt repayment schedule:
1 year or less 1-2 years Total
2023 £ £ £
Unsecured loan notes 168,487 - 168,487
168,487 - 168,487
1 year or less 1-2 years Total
2022 £ £ £
Unsecured loan notes 1,812,744 799,145 2,611,889
1,812,744 799,145 2,611,889
Loan notes
Loan notes
2018 2021 2022 Total
£ £ £
At 1 January 2022 24,126 321,681 - 345,807
Issued in year - - 2,370,000 2,370,000
Interest capitalised - - 48,685 48,685
Converted into shares - - (21,250) (21,250)
Repaid in year (24,126) (107,227) - (131,353)
At 31 December 2022 - 214,454 2,397,435 2,611,889
Interest capitalised - - 74,691 74,691
Converted into shares - - (2,303,639) (2,303,639)
Repaid in year - (214,454) - (214,454)
At 31 December 2023 - - 168,487 168,487
2021 Non-Convertible Loan note
The 2021 Notes pay 12% interest biannually. The 2021 Notes were repaid in
full during 2023.
July 2022 Convertible Loan note
The July 2022 Convertible Loan Notes totalling £1.87 million pay interest at
12% per annum, on a quarterly basis. The first interest payment on 30
September 2022 was capitalised and added to the loan principal.
The July 2022 Convertible Loan Notes, together with capitalised interest, were
all converted into 45,476,551 new ordinary shares of 0.1p at 4.25p per
ordinary share during 2023.
September 2022 Convertible Loan note
The September 2022 Convertible Loan Notes totalling £0.5 million pay interest
at 15% per annum, on a quarterly basis. The first interest payment on 30
September 2022 was capitalised and added to the loan principal.
The September 2022 Convertible Loan Notes are convertible at 5.50p per
ordinary share at any time at the election of the Noteholder. During 2023,
£188,745 of the September 2023 Convertible Loan Notes, including capitalised
interest, were converted into 3,431,734 new ordinary shares of 0.1p each.
In December 2023, £182,141 September 2023 Convertible Loan Notes were
converted into 3,113,654 new ordinary shares of 0.1p each.
19 DEFERRED TAXATION
2023 2022
£ £
At 1 January 2023 1,258,809 40,394
On revaluation of investments (331,151) 1,218,415
At 31 December 2023 927,658 1,258,809
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:
2023 2022
Financial assets measured at amortised costs: £ £
Trade and other receivables 10,272 7,643
Cash and cash equivalents 3,186 1,482,762
Amounts owing from group undertakings 6,185,765 5,496,676
6,199,223 6,987,081
2023 2022
Financial liabilities measured at amortised costs: £ £
Unsecured loan notes 168,487 2,611,889
Trade and other payables 126,117 41,440
Total financial liabilities 294,604 2,653,329
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:
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, the
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 inputs Inter-relationship between significant unobservable inputs and fair value
measurement
NPV - The valuation model considers the present value of expected receipts, Forecast annual revenue growth rate The estimated fair value would increase (decrease) if:
discounted using a risk-adjusted discount rate. The expected receipt is
determined by considering the possible scenarios of forecast revenue and gas Forecast gas prices - the annual revenue growth rate were higher (lower);
prices, the amount to be received under each scenario and the probability of
each scenario. Risk-adjusted discount rate - the gas prices were higher (lower); or
- the risk-adjusted discount rate were lower (higher).
Generally, a change in the any of the above variables would 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.
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 2023, the Company's monetary assets and liabilities are
denominated in GBP Sterling, the functional currency of the Company and
therefore at the year end the company had no exposure to net currency gains
and losses.
Although the Company's subsidiary undertakings operate in the Eurozone and the
Company provides working capital to those companies, 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 in 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 £13 (2022: £13) due
from PXOG Massey Limited, the Company's wholly owned subsidiary.
Included in trade and other receivables is an amount of £5,510,556 (2022:
£4,821,467) due from PXOG Marshall Limited, the Company's wholly owned
subsidiary. Interest receivable of £515,044 (2022: £324,805) has been
accounted for in the Statement of Profit or Loss.
Included in trade and other receivables is an amount of £675,196 (2022:
£675,196) due from PXOG Muirhill Limited, the Company's wholly owned
subsidiary.
Included in trade and other receivables is an amount of £3,346 (2022: £nil)
due from Tarba Energía S.L. ("Tarba"). Mark Routh is a director of Tarba.
At the statement of financial position date, the Directors had the following
interests in the unsecured loan notes (note 18):
2023 2022
£ £
Mark Routh - 51,164
Richard Mays (resigned 7 February 2023) - 87,589
William Smith - 51,164
Alasdair Buchanan - 51,042
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 2022 and 31 December 2023 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:
Number of shares Weighted average remaining contractual life (years) Weighted average exercise price (pence)
2023
Brought forward 11,464,813 2.84 6.61
Granted during the year 7,900,000 -
Exercised during the year (850,400) -
Lapsed during the year (600,529) -
Carried forward 17,913,884 3.12 8.05
Number of shares Weighted average remaining contractual life (years) Weighted average exercise price (pence)
2022
Brought forward 5,820,544 1.46 6.27
Granted during the year 10,300,000 -
Exercised during the year (4,654,131) -
Lapsed during the year (1,600) -
Carried forward 11,464,813 2.84 6.61
All options were exercisable at the year end. 850,400 options were exercised
during the year.
The following share-based payment arrangements were in existence at the
year-end.
Options Number Expiry date Exercise price Fair value at grant date
1 Granted 16 April 2015 113,884 15/04/2025 76.25p 1.94p
2 Granted 18 March 2022 6,300,000 18/03/2025 5.00p 2.10p
3 Granted 23 September 2022 3,600,000 23/09/2027 8.15p 2.91p
4 Granted 28 February 2023 3,700,000 27/02/2028 12.25p 5.18p
5 Granted 26 July 2023 4,200,000 25/07/2028 7.00p 2.49p
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:
23. SHARE-BASED PAYMENT TRANSACTIONS - continued
Options Grant date share price Exercise price Expected volatility Expected option life (years) Risk-free interest rate
1 Granted 16 April 2015 100.00p 76.25p 71.50% 3.00 0.71%
2 Granted 18 March 2022 3.85p 5.00p 89.40% 2.00 1.21%
3 Granted 23 September 2022 7.85p 8.15p 87.40% 2.00 4.03%
4 Granted 28 February 2023 11.54p 12.25p 87.20% 3.00 3.73%
5 Granted 26 July 2023 6.25p 7.00p 79.90% 3.00 4.52%
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
£296,191 (2022: £187,417).
Warrants
At 31 December 2022 and 31 December 2023, 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:
Number of shares Weighted average remaining contractual life (years) Weighted average exercise price (pence)
2023
Brought forward 666,684 0.23 3.00
Exercised in the year (666,684) 3.00
Carried forward - - -
Number of shares Weighted average remaining contractual life (years) Weighted average exercise price (pence)
2022
Brought forward 27,245,000 1.22 3.03
Exercised during the year (26,253,316) 3.02
Lapsed during the year (325,000) 10.00
Carried forward 666,684 0.23 3.00
All warrants were exercised during the year.
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.
2023 2022
£ £
Salaries and other short-term employee benefits 278,350 254,833
Share-based payment 169,406 163,994
447,756 418,827
Salaries and fees Benefits in kind Share-based payment 2023 2022
£ £ £ £ £
Mark Routh 217,500 7,017 93,757 318,274 252,927
William Smith 28,000 - 26,635 54,635 61,300
Alasdair Buchanan 23,333 - 26,635 49,968 52,300
Andrew Hay - appointed 19 April 2023 - - 22,379 22,379 -
Richard Mays - resigned 7 February 2023 2,500 - - 2,500 52,300
271,333 7,017 169,406 447,756 418,827
The Directors interests in share options as at 31 December 2023 are as
follows:
Director Number of share options Exercise price Date of grant First date of exercise Final date of exercise
Mark Routh 2,100,000 5.00p 18/03/2022 18/03/2022 18/03/2025
Mark Routh 900,000 8.15p 23/09/2022 23/09/2022 23/09/2027
Mark Routh 1,233,333 12.25p 28/02/2023 28/02/2023 27/02/2028
Mark Routh 1,200,000 7.00p 26/07/2023 26/07/2023 25/07/2028
5,433,333
William Smith 21,669 76.25p 14/04/2015 14/04/2015 14/04/2025
William Smith 900,000 5.00p 18/03/2022 18/03/2022 18/03/2025
William Smith 900,000 8.15p 23/09/2022 23/09/2022 23/09/2027
William Smith 370,000 12.25p 28/02/2023 28/02/2023 27/02/2028
William Smith 300,000 7.00p 26/07/2023 26/07/2023 25/07/2028
2,491,669
Alasdair Buchanan 900,000 5.00p 18/03/2022 18/03/2022 18/03/2025
Alasdair Buchanan 900,000 8.15p 23/09/2022 23/09/2022 23/09/2027
Alasdair Buchanan 370,000 12.25p 28/02/2023 28/02/2023 27/02/2028
Alasdair Buchanan 300,000 7.00p 26/07/2023 26/07/2023 25/07/2028
2,470,000
Andrew Hay 900,000 7.00p 26/07/2023 26/07/2023 25/07/2028
900,000
25. EVENTS AFTER THE REPORTING PERIOD
All remaining interest-bearing debt outstanding at the reporting date, and
accrued interest, was repaid to debt-holders by 31 March 2024. No further
debt or equity raises have occurred between the reporting date and the date of
this report.
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